-----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, GooeFiSI1uWK/UdHXbCMqBo01AQ7pmNR1cnzKMvJgePeu9KL4+/U2Omgjv+cb4Rp JbwqsTplY9HEY8LT1mKeeg== 0000950109-96-003953.txt : 19960621 0000950109-96-003953.hdr.sgml : 19960621 ACCESSION NUMBER: 0000950109-96-003953 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19960620 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOEWEN GROUP INTERNATIONAL INC CENTRAL INDEX KEY: 0000927914 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 521522627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-03135 FILM NUMBER: 96583415 BUSINESS ADDRESS: STREET 1: 50 E RIVERCENTER BLVD STE 800 CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 6064316663 MAIL ADDRESS: STREET 1: 50 EAST RIVER CENTER BLVD STREET 2: SUITE 800 CITY: COVINGTON STATE: KY ZIP: 41011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOEWEN GROUP INC CENTRAL INDEX KEY: 0000845577 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 980121376 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-03135-01 FILM NUMBER: 96583416 BUSINESS ADDRESS: STREET 1: 4126 NORLAND AVE CITY: BURNABY BC CANADA V5 STATE: A1 BUSINESS PHONE: 6042999321 MAIL ADDRESS: STREET 1: 4126 NORLAND AVE STREET 2: BRITISH COLUMIA CITY: BURNABY V5G 3S8 STATE: A1 S-4/A 1 AMENDMENT #1 TO REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996 REGISTRATION NOS. 333-3135 AND 333-3135-01 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- THE LOEWEN GROUP INC. LOEWEN GROUP INTERNATIONAL, INC. (Exact name of registrant as specified (Exact name of registrant as specified in its charter) in its charter) BRITISH COLUMBIA DELAWARE (State or other jurisdiction of incorporation or organization) 7261 7261 (Primary Standard Industrial Classification Code Number) 61-1264590 98-0121376 (I.R.S. Employer Identification Number) 50 EAST RIVERCENTER BOULEVARD 4126 NORLAND AVENUE SUITE 800 BURNABY, BRITISH COLUMBIA COVINGTON, KENTUCKY 41011 CANADA V5G 3S8 (606) 431-6663 (604) 299-9321 (Address, including zip or postal code, and telephone number, including area code, of registrants' principal executive offices) THE CORPORATION TRUST COMPANY TIMOTHY R. HOGENKAMP 1209 ORANGE STREET LOEWEN GROUP INTERNATIONAL, INC. WILMINGTON, DELAWARE 19801 (302) 658-7581 50 EAST RIVERCENTER BOULEVARD, SUITE 800 COVINGTON, KENTUCKY 41011 (606) 431-6663 (Name, address, including zip code, and telephone number, including area code, of agent for service) with copies to: DWIGHT K. HAWES VICE-PRESIDENT, FINANCE MICHELLE L. JOHNSON THE LOEWEN GROUP INC. THELEN, MARRIN, JOHNSON & BRIDGES 4126 NORLAND AVENUE TWO EMBARCADERO CENTER, SUITE 2100 BURNABY, BRITISH COLUMBIA SAN FRANCISCO, CALIFORNIA 94111-3995 CANADA V5G 3S8 Approximate date of commencement of proposed sale to the public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] --------------- The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATIONS-K
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS -------------------------------------- --------------------------------- A. INFORMATION ABOUT THE TRANSACTION 1. Forepart of Registration Statement and Outside Front Cover Page of Cover Page of Registration Statement; Prospectus......................... Cross Reference Sheet; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front Cover Page of Prospectus; Outside Back Cover Page of Prospectus; Enforcement of Certain Civil Liabilities Against Guarantor; Available Information; Incorporation of Certain Information by Reference 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Prospectus Summary; Risk Factors; Information........................ Business 4. Terms of the Transaction........... Prospectus Summary; The Exchange Offer; Description of Exchange Notes; Certain U.S. Federal Income Tax Considerations; Certain Canadian Federal Tax Considerations 5. Pro Forma Financial Information.... Not Applicable 6. Material Contacts With the Company Being Acquired..................... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.......... Not Applicable 8. Interests of Named Experts and Counsel............................ Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................... Not Applicable B. INFORMATION ABOUT THE REGISTRANTS 10. Information With Respect to S-3 Registrants....................... Prospectus Summary; Risk Factors; Recent Developments; Consolidated Capitalization; Business; Description of Exchange Notes 11. Incorporation of Certain Information by Reference.......... Incorporation of Certain Information by Reference 12. Information With Respect to S-2 or S-3 Registrants................... Not Applicable 13. Incorporation of Certain Information by Reference.......... Not Applicable 14. Information With Respect to Registrants Other Than S-2 or S-3 Registrants....................... Not Applicable
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS ----------------------------------- --------------------------------- C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED 15. Information With Respect to S-3 Companies......................... Not Applicable 16. Information With Respect to S-2 or S-3 Companies..................... Not Applicable 17. Information With Respect to Companies Other Than S-2 or S-3 Companies......................... Not Applicable D. VOTING AND MANAGEMENT INFORMATION 18. Information if Proxies, Consents or Other Authorizations Are to Be Solicited......................... Not Applicable 19. Information if Proxies, Consents or Other Authorizations Are Not to Be Solicited or in an Exchange Offer............................. Incorporation of Certain Information by Reference
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THE EXCHANGE NOTES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. EXCHANGE NOTES MAY NOT BE ISSUED NOR MAY + +OFFERS TO EXCHANGE BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO EXCHANGE + +NOR SHALL THERE BE ANY ISSUANCE OF EXCHANGE NOTES IN ANY STATE IN WHICH SUCH + +OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR + +QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED , 1996 LOEWEN GROUP INTERNATIONAL, INC. OFFER TO EXCHANGE $225,000,000 7 1/2% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001 FOR ALL OUTSTANDING 7 1/2% SERIES 1 SENIOR GUARANTEED NOTES DUE 2001 AND $125,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003 FOR ALL OUTSTANDING 8 1/4% SERIES 2 SENIOR GUARANTEED NOTES DUE 2003 GUARANTEED BY THE LOEWEN GROUP INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME ON , 1996, UNLESS EXTENDED. ----------- Loewen Group International, Inc., a Delaware corporation ("LGII"), hereby offers (the "Exchange Offer"), upon the terms and subject to conditions set forth in this Prospectus ("Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange (i) up to an aggregate principal amount of $225,000,000 of its 7 1/2% Series 3 Senior Guaranteed Notes due 2001 (the "Series 3 Exchange Notes") for up to an aggregate principal amount of $225,000,000 of its outstanding 7 1/2% Series 1 Senior Guaranteed Notes due 2001 (the "Series 1 Notes") and (ii) up to an aggregate principal amount of $125,000,000 of its 8 1/4% Series 4 Senior Guaranteed Notes due 2003 (the "Series 4 Exchange Notes" and, together with the Series 3 Exchange Notes, the "Exchange Notes") for up to an aggregate principal amount of $125,000,000 of its outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003 (the "Series 2 Notes" and together with the Series 1 Notes, the "Outstanding Notes"). The terms of the Series 3 Exchange Notes are identical in all material respects to those of the Series 1 Notes, and the terms of the Series 4 Exchange Notes are identical in all material respects to those of the Series 2 Notes, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except for certain interest provisions relating to such registration rights. The Exchange Notes will be issued pursuant to, and entitled to the benefits of, the Indenture (as defined) governing the Outstanding Notes. The Exchange Notes and the Outstanding Notes are sometimes referred to collectively as the "Notes." The Exchange Notes will be fully and unconditionally guaranteed, on a senior basis (the "Guarantees"), by The Loewen Group Inc., a corporation under the laws of British Columbia, Canada ("Loewen" or the "Guarantor" and, together with its subsidiaries and associated entities, the "Company"). The Exchange Notes and the Guarantees will be unsecured senior obligations of LGII and Loewen, respectively, and will rank pari passu in right of payment with all unsecured senior indebtedness of LGII and Loewen, respectively. The Exchange Notes include a covenant (the "Lien Limitation") limiting Liens (as defined) to certain categories of Liens described in the Indenture (as defined). On May 31, 1996, LGII closed a five-year $750 million secured revolving credit facility (the "New Bank Facility"). The New Bank Facility is secured by, among other things, a pledge for the benefit of the lenders under the New Bank Facility of the shares held by Loewen of substantially all of the subsidiaries in which Loewen directly or indirectly holds more than a 50% voting or economic interest (other than LGII) and all of the financial assets of LGII (LGII does not have material assets other than financial assets) (collectively, the "Collateral"). In order to satisfy the Lien Limitation, the Lien secured by the Collateral has to be shared equally and ratably with the holders of the Indebtedness (as defined) evidenced by the Exchange Notes. The Lien secured by the Collateral also is shared equally and ratably with all other holders of Pari Passu Indebtedness (as defined). However, the holders of the Exchange Notes will not have an independent right to require the Lien secured by the Collateral to remain in place or to require any other security for the Exchange Notes. As at March 31, 1996, the aggregate amount of outstanding Pari Passu Indebtedness was $842 million, after giving effect to the closing of the New Bank Facility and the application of $75 million borrowed thereunder to repay permanently certain indebtedness. See "Description of Exchange Notes" and "Description of Certain Other Indebtedness." The Exchange Notes and the Guarantees are effectively subordinated in right of payment to all existing and future liabilities, including trade payables, of the subsidiaries of LGII and Loewen. As at March 31, 1996, the aggregate amount of Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness) was approximately $. million, and the aggregate amount of Indebtedness of Loewen's subsidiaries other than LGII and its subsidiaries (excluding intercompany Indebtedness) was approximately $. million. LGII will accept for exchange any and all Outstanding Notes that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York time, on , 1996, unless extended by LGII, in its sole discretion (the "Expiration Date"). The Exchange Offer will not in any event be extended to a date beyond , 1996. Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date. If LGII terminates the Exchange Offer and does not accept for exchange any Outstanding Notes with respect to the Exchange Offer, LGII will promptly return the Outstanding Notes to the tendering holders thereof. The Exchange Offer is not conditioned upon any minimum principal amount of Outstanding Notes being tendered for exchange, but is otherwise subject to certain customary conditions. The Outstanding Notes may be tendered only in integral multiples of $1,000. SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED CAREFULLY IN CONNECTION WITH THE EXCHANGE OFFER. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI- TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- THE DATE OF THIS PROSPECTUS IS JUNE , 1996. Interest on the Exchange Notes will accrue from the date of issuance thereof and will be payable semi-annually on April 15 and October 15 of each year, commencing on October 15, 1996. Holders of the Exchange Notes will receive interest on October 15, 1996 from the date of initial issuance of the Outstanding Notes. Interest on the Outstanding Notes accepted for exchange will cease to accrue upon issuance of the respective Exchange Notes. The Series 3 Exchange Notes will mature on April 15, 2001, and the Series 4 Exchange Notes will mature on April 15, 2003. The Series 3 Exchange Notes will not be redeemable prior to maturity. The Series 4 Exchange Notes will be redeemable at the option of LGII, in whole or in part, at any time on or after April 15, 2000 at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date. In the event of a Change of Control (as defined herein), LGII will be obligated to make an offer to purchase all of the Notes then outstanding at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the purchase date. In addition, LGII will be obligated to make an offer to purchase Notes in the event of certain asset sales. See "Description of Exchange Notes." The Exchange Notes are being offered hereunder in order to satisfy certain obligations of LGII and Loewen contained in the Registration Rights Agreement dated March 20, 1996 (the "Registration Rights Agreement") by and among LGII and Loewen and Smith Barney, Inc., Alex. Brown & Sons Incorporated, Morgan Stanley & Co. Incorporated, Nesbitt Burns Securities Inc. and RBC Dominion Securities Corporation, as the initial purchasers (the "Initial Purchasers") with respect to the initial sale of the Outstanding Notes. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission"), LGII and Loewen believe that, except as described below, the Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by respective holders thereof without further compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, as amended (the "Securities Act"), provided that (i) such Exchange Notes are acquired in the ordinary course of such holder's business and (ii) such holder does not intend to participate in, has no arrangement or understanding with any person to participate in, and is not engaged in and does not intend to engage in, a distribution of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of LGII or Loewen within the meaning of Rule 405 under the Securities Act or that is a broker-dealer who purchased Outstanding Notes from the Company to resell pursuant to an exemption from registration (a) cannot rely on such interpretations by the staff of the Commission, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer, and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of such Outstanding Notes. In the event that applicable interpretations by the staff of the Commission change or otherwise do not permit resales of the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act, holders of Exchange Notes who transfer Exchange Notes in violation of the prospectus delivery provisions of the Securities Act or without an exemption from registration thereunder may incur liability thereunder. The Company does not assume or indemnify holders against such liability. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received pursuant to the Exchange Offer in exchange for Outstanding Notes that were acquired by such broker-dealer as a result of market-making activities or other trading activities. LGII has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. This Prospectus may not be used for any other offers to resell or re- transfer any Exchange Notes, whether by a broker-dealer or otherwise. See "Plan of Distribution." Prior to the Exchange Offer, there has been no public market for the Notes. There can be no assurance as to the liquidity of any markets that may develop for the Exchange Notes, the ability of holders to sell the Exchange Notes or the price at which holders would be able to sell the Exchange Notes. LGII does not intend to list the Exchange Notes for trading on any national securities exchange or over-the-counter market system. Future trading prices of the Exchange Notes will depend on many factors including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. Certain of the Initial Purchasers have advised LGII that they intend to make a market in the Exchange Notes offered hereby. However, the Initial Purchasers are not obligated to do so and any market making may be discontinued at any time without notice. Neither LGII nor Loewen will receive any proceeds from the Exchange Offer. LGII has agreed to pay the expenses incident to the Exchange Offer. No underwriter is being used in connection with this Exchange Offer. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM THE CORPORATE SECRETARY OF THE LOEWEN GROUP INC., 4126 NORLAND AVENUE, BURNABY, BRITISH COLUMBIA, V5G 3S8, CANADA; TELEPHONE (604) 299-9321. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1996. UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ---------------- NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS IN ANY WAY PASSED UPON THE MERITS OF THE SECURITIES OFFERED HEREUNDER AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENSE. THE SECURITIES OFFERED HEREUNDER HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF CANADA AND, SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD IN CANADA. 2 AVAILABLE INFORMATION LGII and Loewen have filed with the Commission a Registration Statement on Form S-4 (together with any amendments, exhibits, annexes and schedules thereto, the "Exchange Offer Registration Statement") pursuant to the Securities Act and the rules and regulations thereunder, covering the Exchange Notes. This Prospectus does not include all of the information set forth in the Exchange Offer Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Statements made in the Prospectus as to the contents of any contract, agreement or other document referred to in the Exchange Offer Registration Statement are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. Loewen is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information filed by Loewen may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661- 2511. Copies of such material can be obtained by mail from the Public Reference section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common shares without par value of Loewen ("Common Shares") are quoted on The Nasdaq National Market and are traded on The Toronto Stock Exchange and The Montreal Exchange. Reports, proxy statements and other information filed by Loewen may be inspected at the offices of The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006, at the offices of The Toronto Stock Exchange at The Exchange Tower, 2 First Canadian Place, Toronto, Ontario, Canada M5X 1J2 and at the offices of The Montreal Exchange at 800 Victoria Square, Montreal, Quebec, Canada H4Z 1A9. FINANCIAL INFORMATION All dollar amounts in this Prospectus are in United States dollars ("U.S.$" or "$") unless otherwise indicated. References to "Cdn.$" are to Canadian dollars. The Company prepares its consolidated financial statements included in its reports filed pursuant to the Exchange Act in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). Differences between Canadian GAAP and accounting principles generally accepted in the United States ("U.S. GAAP"), as applicable to the Company, are explained in Note 21 to the Company's 1995 Consolidated Financial Statements, included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, as amended. The selected consolidated financial data with respect to Loewen included in this Prospectus is presented on a Canadian GAAP and a U.S. GAAP basis. The selected consolidated financial data with respect to LGII is presented on a Canadian GAAP basis only. The consolidated financial statements of the Company for the year ended December 31, 1993, and for prior years, were published in Canadian dollars. Effective January 1, 1994, the Company adopted the United States dollar as its reporting currency and, accordingly, has published its consolidated financial statements for the year ended December 31, 1994 and subsequent periods in United States dollars. Financial information relating to periods prior to January 1, 1994 has been translated from Canadian dollars into United States dollars as required by Canadian GAAP at the December 31, 1993 rate of U.S.$1.00 = Cdn.$1.3217. 3 PROSPECTUS SUMMARY The following summary information is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. THE COMPANY The Loewen Group Inc. operates the second-largest number of funeral homes and cemeteries in North America and the largest number of funeral homes in Canada. The Company also engages in the pre-need selling of funeral services through its operating locations and the pre-need selling of cemetery and cremation services through certain of its operating locations. As at June ., 1996, the Company operated . funeral homes (not all of which are wholly owned) throughout North America. This included . funeral homes in the United States (including locations in Puerto Rico) and . funeral homes in Canada. In addition, as at such date, the Company operated . cemeteries in the United States and . cemeteries in Canada. As at the close of business on June ., 1996, the Company had negotiated agreements for the acquisition of a further . funeral homes and . cemeteries in the United States and . funeral homes in Canada. THE FUNERAL SERVICE INDUSTRY The funeral service industry historically has been characterized by low business risk compared with most other businesses. According to the 1993 Business Failure Record published by The Dun & Bradstreet Corporation, the average business failure rate in the United States in 1993 was 109 per 10,000. The 1993 failure rate of the funeral service and crematoria industry was 24 per 10,000, among the lowest of all industries. Management believes this low failure rate is the result of a number of factors, including customers' tendencies to make choices based on reputation for quality service rather than price and the number of years required to establish a caring reputation in the community. Further, the funeral service industry historically has not been significantly affected by economic or market cycles. Future demographic trends are expected to contribute to the continued stability of the funeral service industry. The U.S. Department of Commerce, Bureau of the Census, projects that, reflecting the well-publicized "graying of America" as the baby boom generation reaches old age, the number of deaths in the United States will grow at approximately 1.0% annually from 1990 through 2010. The funeral service industry in North America is highly fragmented, consisting primarily of small, stable, family-owned businesses. Management estimates that notwithstanding the increasing trend toward consolidation over the last few years, only approximately 9% of the 23,500 funeral homes and approximately 6% of the 11,000 cemeteries in North America are currently owned and operated by the five largest publicly-traded North American funeral service companies. GROWTH STRATEGY The Company capitalizes on these attractive industry fundamentals through a growth strategy that emphasizes three principal components: (i) acquiring a significant number of small, family-owned funeral homes and cemeteries; (ii) acquiring "strategic" operations consisting predominantly of large, multi- location urban properties that generally serve as platforms for acquiring small, family-owned businesses in surrounding regions; and (iii) improving the revenue and profitability of newly-acquired and established locations. The first element of the Company's growth strategy is the acquisition of small, family-owned funeral homes and cemeteries. Management believes that the Company has a competitive advantage in this market due to its culture and its well-known and understood reputation for honoring existing owners and staff. The second element of the Company's growth strategy is the acquisition of large, multi-location urban properties. In 1995, the Company's "strategic" acquisitions included Osiris Holding Corporation ("Osiris"), a leading cemetery operator in the United States, and MHI Group, Inc. ("MHI"), a publicly traded company that operated 16 funeral homes and five cemeteries in Florida and Colorado. In addition, in March 1996, the Company acquired certain assets from S.I. Acquisition Associates, L.P. ("S.I."), which included 15 funeral homes, two cemeteries and two insurance companies, all located in Louisiana. 4 The final element of the Company's growth strategy is its focus on enhancing the revenue and profitability of newly-acquired and established operations. Through the Company's integration process, newly-acquired funeral homes typically show an immediate improvement in gross margin due in part to the significant economies of scale available to the Company. Cemeteries typically show an improvement in gross margin within the first year after acquisition. Over time, the Company has continued to increase the revenue and profitability of its established operations through the introduction of additional merchandising, cost control programs and inflation based pricing. On an ongoing basis, the Company also seeks to improve the market share and earnings of established operations by helping local managers to market services more effectively and to enhance the reputation of their operations in the community. 1996 FINANCINGS On May 31, 1996, LGII closed a five-year $750 million secured revolving credit facility. The Collateral for the New Bank Facility includes a pledge for the benefit of the lenders under the New Bank Facility of the shares held by Loewen of substantially all of the subsidiaries in which Loewen directly or indirectly holds more than a 50% voting or economic interest (other than LGII) and all of the financial assets of LGII (LGII does not have material assets other than financial assets). The Exchange Notes include a Lien Limitation that limits Liens to certain categories of Liens described in the Indenture. In order to satisfy the Lien Limitation, the Lien secured by the Collateral for the New Bank Facility has to be shared equally and ratably with the holders of the Indebtedness evidenced by the Notes. The Lien secured by the Collateral also is shared equally and ratably with all other holders of Pari Passu Indebtedness. However, the holders of the Exchange Notes will not have an independent right to require the Lien secured by the Collateral to remain in place or to require any other security for the Exchange Notes. As at March 31, 1996, the aggregate amount of Pari Passu Indebtedness was $842 million, after giving effect to (i) net proceeds of approximately $19 million from the exercise of the underwriters' overallotment option with respect to the 1996 Equity Offering and (ii) the closing of the New Bank Facility and the application of $75 million borrowed thereunder to repay permanently the outstanding balance under LGII's unsecured multi-currency revolving credit facilities (the "Multi-Currency Revolver"). The balance of the New Bank Facility will be used for general corporate purposes, including future acquisitions. See "Description of Certain Other Indebtedness." In March 1996, all of the Outstanding Notes were issued pursuant to a private placement (the "Initial Notes Offering") for gross proceeds of $350 million. Concurrently with the Initial Notes Offering, Loewen completed a public offering in Canada and a simultaneous private placement in the United States of 7,000,000 Common Shares and, in April 1996, sold an additional 700,000 Common Shares (pursuant to the exercise of an over-allotment option) for aggregate gross proceeds of approximately Cdn.$302 million (U.S.$221 million) (the "1996 Equity Offering"). The proceeds of the Initial Notes Offering and the 1996 Equity Offering were used to pay down the balance on the Multi-Currency Revolver and for general corporate purposes including acquisitions. In January 1996, Loewen completed a public offering in Canada and a simultaneous private placement in the United States of 8,800,000 Convertible First Preferred Shares Series C Receipts (the "Series C Receipts") for gross proceeds of Cdn.$220 million (the "1996 Preferred Share Offering"). The gross proceeds were deposited with an escrow agent. The net proceeds will be released to Loewen from time to time by issuing and depositing with the escrow agent an equal dollar amount of 6.00% Cumulative Redeemable Convertible First Preferred Shares, Series C ("Series C Preferred Shares") and used to fund acquisitions. As at June ., 1996, all Series C Preferred Shares had been issued and approximately Cdn.$. million (U.S.$. million) had been released from escrow. ---------------- LGII was incorporated in 1987 under the laws of Delaware. LGII's principal executive offices are located at 50 East RiverCenter Boulevard, Covington, Kentucky 41011; telephone (606) 431-6663. Loewen was incorporated in 1985 under the laws of British Columbia, Canada. Loewen's principal executive offices are located at 4126 Norland Avenue, Burnaby, British Columbia, Canada, V5G 3S8; telephone (604) 299-9321. 5 THE EXCHANGE OFFER The Exchange Notes.......... The form and terms of the Exchange Notes are identical in all material respects to the terms of the respective Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except for certain interest provisions relating to such registration rights described below under "Description of Exchange Notes." The Exchange Offer.......... LGII is offering to exchange (i) up to an aggregate principal amount of $225,000,000 of its 7 1/2% Series 3 Senior Guaranteed Notes due 2001 for up to an aggregate principal amount of $225,000,000 of its outstanding 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and (ii) up to an aggregate principal amount of $125,000,000 of its 8 1/4% Series 4 Senior Guaranteed Notes due 2003 for up to an aggregate principal amount of $125,000,000 of its outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003. Outstanding Notes may be exchanged only in integral multiples of $1,000. Expiration Date; Withdrawal The Exchange Offer will expire at 5:00 p.m., New of Tender.................. York time, on , 1996, or such later date and time to which it is extended by LGII, in its sole discretion. The Exchange Offer will not in any event be extended to a date beyond , 1996. The tender of Outstanding Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Certain Conditions to the The Exchange Offer is subject to certain Exchange Offer............. customary conditions, which may be waived by LGII. See "The Exchange Offer--Certain Conditions to the Exchange Offer. Procedures for Tendering Each holder of Outstanding Notes wishing to Outstanding Notes.......... accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Outstanding Notes and any other required documentation to the Exchange Agent (as defined herein) at the address set forth herein. By executing the Letter of Transmittal, each holder will represent to LGII that, among other things, (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it is not engaged in and does not intend to engage in a distribution of the Exchange Notes and (iii) it is not an "affiliate" of LGII or Loewen within the meaning of Rule 405 under the Securities Act or, if it is an affiliate of LGII or Loewen, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. 6 Interest on the Exchange Notes...................... The Series 3 Exchange Notes will bear interest at the rate of 7 1/2% per annum and the Series 4 Exchange Notes will bear interest at the rate of 8 1/4% per annum, payable semi-annually on April 15 and October 15 of each year, commencing October 15, 1996, to holders of record of Exchange Notes at the close of business on the immediately preceding April 1 and October 1, respectively. Holders of the Exchange Notes will receive interest on October 15, 1996 from the date of initial issuance of the Outstanding Notes. Interest on the Outstanding Notes accepted for exchange will cease to accrue upon issuance of the respective Exchange Notes. Special Procedures for Any beneficial owner whose Outstanding Notes are Beneficial Owners.......... registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Outstanding Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in its own name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. Guaranteed Delivery Holders of Outstanding Notes who wish to tender Procedures................. their Outstanding Notes and whose Outstanding Notes are not immediately available or holders of Outstanding Notes who cannot deliver their Outstanding Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent, prior to the Expiration Date, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures." Registration Requirements... LGII has agreed to use its best efforts to consummate the Exchange Offer. The Exchange Offer will provide holders of the Outstanding Notes with an opportunity to exchange their Outstanding Notes for the Exchange Notes, which will be issued without legends restricting the transfer thereof. If applicable interpretations of the staff of the Commission do not permit LGII to effect the Exchange Offer, or in certain other circumstances, LGII has agreed to file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Outstanding Notes and to use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and, subject to certain exceptions, to keep the Shelf Registration Statement effective for 180 days after the effective date thereof. 7 Certain U.S. and Canadian For a discussion of certain U.S. and Canadian tax Federal Tax Considerations considerations relating to the Exchange Notes, see "Certain U.S. Federal Income Tax Considerations" and "Certain Canadian Federal Tax Considerations." Use of Proceeds............. There will be no proceeds to LGII or Loewen from the exchange of Notes pursuant to the Exchange Offer. Exchange Agent.............. Fleet National Bank is the Exchange Agent. The address and telephone number of the Exchange Agent are set forth in "The Exchange Offer-- Exchange Agent." SUMMARY DESCRIPTION OF THE EXCHANGE NOTES Issuer...................... Loewen Group International, Inc. Exchange Notes.............. $225 million principal amount of 7 1/2% Series 3 Senior Guaranteed Notes due 2001 $125 million principal amount of 8 1/4% Series 4 Senior Guaranteed Notes due 2003 Maturity Dates.............. The Series 3 Exchange Notes will mature on April 15, 2001. The Series 4 Exchange Notes will mature on April 15, 2003. Interest Payment Dates...... April 15 and October 15, commencing October 15, 1996 Ranking..................... The Exchange Notes and the Guarantees, when issued, will be secured senior obligations of LGII and Loewen, respectively, and will rank pari passu in right of payment with all secured senior indebtedness of LGII and Loewen, respectively. The Exchange Notes include a Lien Limitation that limits Liens to certain categories of Liens described in the Indenture. The Collateral for the New Bank Facility includes a pledge for the benefit of the lenders under the New Bank Facility of the shares of substantially all of the subsidiaries in which Loewen directly or indirectly holds more than a 50% voting or economic interest (other than LGII) and all of the financial assets of LGII (LGII does not have material assets other than financial assets). In order to satisfy the Lien Limitation, the Lien secured by the Collateral has to be shared equally and ratably with the holders of the Indebtedness evidenced by the Exchange Notes. The Lien secured by the Collateral also is shared equally and ratably with all other holders of Pari Passu Indebtedness. However, the holders of the Exchange Notes will not have an independent right to require the Lien secured by the Collateral to remain in place or to require any other security for the Exchange Notes. In the event that the Lien secured by the Collateral is released, if other security for the Exchange Notes is not provided, the Exchange Notes will become unsecured senior obligations of LGII and Loewen and will rank junior in right of payment to all secured indebtedness of LGII and Loewen. As at March 31, 1996, the aggregate amount of Pari Passu Indebtedness was $. million, after giving effect to (i) net proceeds of approximately $19 million from the exercise of the underwriters' overallotment option with respect to the 1996 Equity Offering and (ii) the closing of the New Bank Facility and the 8 application of $. million borrowed thereunder to repay the Multi-Currency Revolver permanently. The Exchange Notes and related Guarantees will be effectively subordinated in right of payment to all existing and future liabilities, including trade payables, of LGII's and Loewen's subsidiaries, respectively. As at March 31, 1996, the aggregate amount of Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness) was approximately $. million, and the aggregate amount of Indebtedness of Loewen's subsidiaries other than LGII and its subsidiaries (excluding intercompany Indebtedness) was approximately $. million. Guarantees.................. The Exchange Notes will be fully and unconditionally guaranteed on a senior basis, as to principal and interest, by Loewen. Optional Redemption......... The Series 3 Exchange Notes will not be redeemable prior to maturity. The Series 4 Exchange Notes will be redeemable at the option of LGII, in whole or in part, at any time on or after April 15, 2000 at a premium declining to par in 2002, plus accrued and unpaid interest, if any, to the redemption date. Offers to Purchase.......... In the event of a Change of Control (as defined herein), LGII will be obligated to make an offer to purchase the then outstanding Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date. In addition, LGII will be obligated to make an offer to purchase the Exchange Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date, with the net cash proceeds of certain sales or other dispositions of assets. LGII's ability to purchase the Exchange Notes will be dependent upon obtaining third-party financing to the extent it may not have available funds to meet its purchase obligations. There can be no assurance that LGII or the Guarantor will be able to obtain such financing. The term "Change of Control" is limited to certain specified transactions and may not include other events that might adversely affect the financial condition of LGII or result in a downgrade of the credit rating of the Exchange Notes. Certain Covenants........... The Indenture contains certain covenants by Loewen and its Restricted Subsidiaries (as defined herein and including LGII), including, but not limited to, covenants with respect to limitations on the following matters: (i) the incurrence of additional indebtedness, (ii) certain payments, including dividends and investments, (iii) the creation of liens, (iv) sales of assets and preferred stock, (v) transactions with interested persons, (vi) payment restrictions affecting subsidiaries, (vii) sale-leaseback transactions and (viii) mergers and consolidations. During any time that the ratings assigned to the Notes by the Rating Agencies (as defined herein) are no less than BBB- and Baa3, the covenants described under (i), (ii), (iv), (v) and (vi) above will be suspended. See "Description of Exchange Notes--Certain Covenants." 9 THE LOEWEN GROUP INC. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (IN THOUSANDS OF U.S.$, EXCEPT PER SHARE DATA, OPERATING DATA AND RATIOS) Set forth below are certain selected consolidated financial and other data of the Company for the periods indicated. This information should be read in conjunction with the Company's 1995 Consolidated Financial Statements and other information included or incorporated by reference herein. The selected consolidated financial data for each of the years in the five year period ended December 31, 1995 are derived from the Company's audited consolidated financial statements and notes thereto, which have been prepared in accordance with Canadian GAAP. The financial results for the year ended December 31, 1995 include provisions for the costs of settlements of two significant legal proceedings, litigation-related finance costs and certain additional legal and general and administrative costs. See "Recent Developments--Litigation Settlements" for a more detailed description of the settlements and "Recent Developments--1995 Results" for a more detailed description of the costs related thereto.
FOR THE QUARTER ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31, CANADIAN GAAP -------------------- ---------------------------------------------------- 1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1) ---------- --------- ---------- ---------- -------- -------- -------- INCOME STATEMENT DATA: Revenue................. $ 193,084 $ 130,059 $599,939 $417,328 $303,011 $218,907 $162,605 Gross margin............ 73,543 53,622 226,808 158,854 115,118 83,708 63,087 Earnings from opera- tions.................. 45,221 34,720 119,053 95,113 65,697 50,563 39,053 Net earnings (loss)..... 17,223 14,057 (76,684) 38,494 28,182 19,766 14,425 Basic earnings (loss) per share (2)......... 0.30 0.34 (1.69) 0.97 0.77 0.59 0.46 Fully diluted earnings (loss) per share (2)(3)................. 0.30 0.34 (1.69) 0.97 0.76 0.58 0.46 OTHER FINANCIAL DATA: Depreciation and amorti- zation................. $11,642 $ 8,396 $ 40,103 $ 28,990 $ 21,196 $ 16,059 $ 11,053 EBITDA (4).............. 56,863 43,116 (25,758) 124,103 86,893 66,622 50,106 Ratio of earnings to fixed charges ......... 2.2x 2.6x -- (5) 2.5x 2.9x 2.6x 2.6x Aggregate dividends de- clared per share....... 0.050 -- 0.050 0.070 0.045 0.030 0.015 AS AT MARCH 31, AS AT DECEMBER 31, -------------------- ---------------------------------------------------- 1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1) ---------- --------- ---------- ---------- -------- -------- -------- BALANCE SHEET DATA: Total assets............ $2,705,660 1,581,616 $2,262,980 $1,326,275 $913,661 $675,111 $518,492 Total long-term debt (6).................... 1,009,092 677,355 934,509 516,654 341,977 246,715 193,853 Preferred securities of subsidiary............. 75,000 75,000 75,000 75,000 -- -- -- Shareholders' equity.... 923,796 427,702 614,682 411,139 325,890 236,317 172,394 OPERATING DATA: Number of funeral home location (7)........... 868 687 815 641 533 451 365 Number of funeral serv- ices................... 35,278 27,535 114,319 93,760 78,847 63,516 52,212 Number of cemeteries (7).................... 209 150 179 116 70 38 23
10 (1) Certain of the comparative figures have been reclassified to conform to the presentation adopted in 1995. (2) Earnings (loss) per share reflect the two-for-one subdivision of Common Shares in June 1991. (3) Fully diluted earnings (loss) per share figures assume exercise, if dilutive, of employee and other stock options effective on their dates of issue and that the funds derived therefrom were invested at annual after- tax rates of return ranging from 5.85% to 8.49%, in accordance with Canadian GAAP. (4) EBITDA represents net earnings (loss) before interest, dividends on preferred securities of subsidiary, income taxes, depreciation and amortization. EBITDA has been included solely to facilitate the consideration of the covenants of the Indenture that are based, in part, on EBITDA. In addition, the Company understands that EBITDA is used by certain investors as one measure of the Company's historical ability to service its debt. EBITDA data are not a measure of financial performance, do not represent cash flow from operations, under generally accepted accounting principles, and should not be considered as a substitute for net earnings as an indicator of the Company's operating performance or for cash flow as a measure of liquidity. Please refer to the Consolidated Statements of Changes in Financial Position, which include information regarding cash provided by and applied to operations, investing and financing, and Management's Discussion and Analysis of Financial Condition and Results of Operation, which discusses liquidity and capital resources (including sources and uses of capital) in greater detail, both of which appear in Loewen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (5) The 1995 loss is not sufficient to cover fixed charges by a total of $126,584 and as such the ratio of earnings to fixed charges has not been computed. Reference is made to the Statement re Computation of Earnings to Fixed Charges Ratio, which is an exhibit to the Exchange Offer Registration Statement. (6) Total long-term debt comprises long-term debt, including current portion. (7) The numbers of locations for 1994 and 1993 include adjustments and consolidations related to prior periods. 11 Had the Company's Consolidated Financial Statements been prepared in accordance with U.S. GAAP (see Note 21 to the Company's 1995 Consolidated Financial Statements), selected consolidated financial data would be as follows:
FOR THE QUARTER ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31, U.S. GAAP --------------------- ---------------------------------------------------- 1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1) ---------- ---------- ---------- ---------- -------- -------- -------- INCOME STATEMENT DATA: Revenue................. $ 193,084 $ 130,059 $ 599,939 $ 417,479 $308,402 $239,452 $185,993 Earnings from opera- tions.................. 44,461 34,417 117,376 94,758 66,711 54,838 43,692 Earning (loss) before cumulative effect of change in accounting principles............. 17,647 14,210 (75,800) 39,652 28,912 21,330 15,893 Fully diluted earnings (loss) per share before cumulative effect of change in accounting principles (2)......... 0.31 0.34 (1.67) 0.98 0.77 0.62 0.50 OTHER FINANCIAL DATA: EBITDA (3).............. 56,205 43,062 (26,967) 123,748 88,428 72,404 56,335 Ratio of earnings to fixed charges.......... 2.1x 2.5x -- (4) 2.4x 2.9x 2.6x 2.5x Aggregate dividends de- clared per share....... 0.050 -- 0.050 0.070 0.047 0.033 0.017 AS AT MARCH 31, AS AT DECEMBER 31, --------------------- ---------------------------------------------------- 1996 1995 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1) ---------- ---------- ---------- ---------- -------- -------- -------- BALANCE SHEET DATA: Total assets............ $2,800,608 $1,611,858 $2,345,874 $1,329,928 $921,342 $702,096 $592,666 Total long-term debt(5)................ 1,009,092 677,355 894,509 516,654 341,977 256,577 221,736 Preferred securities of subsidiary............. 75,000 75,000 75,000 75,000 -- -- -- Shareholders' equity.... 900,544 402,665 519,006 385,950 299,059 245,472 196,071
- -------- (1) Certain of the comparative figures have been reclassified to conform to the presentation adopted in 1995. (2) Earnings (loss) per share reflects the two-for-one subdivision of Common Shares in June 1991. (3) EBITDA represents net earnings (loss) before interest, dividends on preferred securities of subsidiary, income taxes, depreciation and amortization. EBITDA has been included solely to facilitate the consideration of the covenants of the Indenture that are based, in part, on EBITDA. In addition, the Company understands that EBITDA is used by certain investors as one measure of the Company's historical ability to service its debt. EBITDA data are not a measure of financial performance, do not represent cash flow from operations, under generally accepted accounting principles, and should not be considered as a substitute for net earnings as an indicator of the Company's operating performance or for cash flow as a measure of liquidity. Please refer to the Consolidated Statements of Changes in Financial Position, which include information regarding cash provided by and applied to operations, investing and financing, and Management's Discussion and Analysis of Financial Condition and Results of Operation, which discusses liquidity and capital resources (including sources and uses of capital) in greater detail, both of which appear in Loewen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, as amended. (4) The 1995 loss is not sufficient to cover fixed charges by a total of $128,261 and as such the ratio of earnings to fixed charges has not been computed. Reference is made to the Statement re Computation of Earnings to Fixed Charges Ratio, which is an exhibit to the Exchange Offer Registration Statement. (5) Total long-term debt comprises long-term debt, including current portion. 12 LOEWEN GROUP INTERNATIONAL, INC. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS OF U.S.$) Loewen Group International, Inc. serves as the holding company for the United States assets and operations of the Company. At June ., 1996, LGII's operations consisted of . funeral homes and . cemeteries. Loewen beneficially owns, directly or indirectly, all of the outstanding common stock of LGII. Set forth below are certain selected consolidated financial data relating to LGII. The selected consolidated financial data are derived from the audited consolidated financial statements of LGII, which have been prepared in accordance with Canadian GAAP.
FOR THE QUARTER ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31, --------------------- ------------------------------------------------- 1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1) ---------- ---------- ---------- ---------- -------- -------- -------- INCOME STATEMENT DATA: Revenue................. $ 176,057 $ 115,453 $ 540,825 $ 365,458 $263,493 $190,047 $135,248 Gross margin............ 66,585 47,017 198,867 136,639 97,328 69,675 48,940 Earnings from operations............. 41,355 31,403 75,715 84,390 59,462 44,910 29,297 Net earnings (loss)(2).. 5,465 7,742 (127,353) 7,491 10,671 9,766 7,661 AS AT MARCH 31, AS AT DECEMBER 31, --------------------- ------------------------------------------------- 1996 1995 1995 1994(1) 1993(1) 1992(1) 1991(1) ---------- ---------- ---------- ---------- -------- -------- -------- BALANCE SHEET DATA: Current assets.......... $ 193,397 $ 116,523 $ 184,289 $ 96,943 $ 81,028 $ 57,145 $ 49,028 Non-current assets...... 2,198,025 1,215,679 1,776,425 998,753 686,260 507,545 398,239 ---------- ---------- ---------- ---------- -------- -------- -------- Total assets............ 2,391,422 1,332,202 1,960,714 1,095,696 767,288 564,690 447,267 Current liabilities..... 130,920 87,207 221,555 81,472 36,722 27,242 17,394 Long-term debt, excluding current portion................ 808,317 514,341 730,355 372,887 243,290 176,073 180,784 Other non-current liabilities............ 1,154,730 478,109 891,354 396,534 324,964 251,734 149,214 Preferred securities of subsidiary............. 75,000 75,000 75,000 75,000 -- -- -- Shareholders' equity.... 222,455 177,545 42,450 169,803 162,312 109,641 99,875
- -------- (1) Certain of the comparative figures have been reclassified to conform to the presentation adopted in 1995. (2) Losses incurred during the year ended December 31, 1995 are as a result of LGII recording the litigation settlements and additional intercompany charges payable to Loewen. These intercompany charges are eliminated in the consolidated financial statements of the Company. 13 RISK FACTORS In addition to the other information in this Prospectus, the following factors should be considered carefully prior to tendering Outstanding Notes in the Exchange Offer. HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF THE EXCHANGE NOTES LGII and Loewen are holding companies with no significant independent business operations. Accordingly, their primary sources of cash to meet debt service and other obligations (including payments on the Notes) are dividends and other payments from their respective subsidiaries. Consequently, obligations of LGII and Loewen to their creditors, including holders of the Notes, are effectively subordinated in right of payment and junior to all liabilities (including trade payables) of their respective subsidiaries. As at March 31, 1995, the aggregate amount of indebtedness of LGII's subsidiaries (excluding intercompany indebtedness) was approximately $. million, and the aggregate amount of indebtedness of Loewen's subsidiaries, other than LGII and its subsidiaries, was approximately $. million. POTENTIAL INSUFFICIENCY OF COLLATERAL; NO INDEPENDENT RIGHT TO SECURITY FOR THE EXCHANGE NOTES The Lien secured by the Collateral is shared equally and ratably by the other holders of all Pari Passu Indebtedness, including the New Bank Facility and the Notes. There can be no assurance that the Collateral will be sufficient to cover any payments due on the Exchange Notes. In addition, the Collateral secures the Pari Passu Indebtedness, including the Exchange Notes, only so long as it is required under the New Bank Facility. The Collateral could be released by the lenders under the New Bank Facility, in certain circumstances, without the approval of all the other holders of Pari Passu Indebtedness, including the holders of the Exchange Notes. The holders of the Exchange Notes have no independent right to require the Lien secured by the Collateral to remain in place or to require any other security for the Exchange Notes. CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON TRADING MARKET FOR OUTSTANDING NOTES Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer, as set forth in the legend thereon as a consequence of the issuance of the Outstanding Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Notes may not be offered or sold unless registered under the Securities Act and applicable state laws, or pursuant to an exemption therefrom. Subject to the obligation by LGII and Loewen to file a Shelf Registration Statement covering resales of Outstanding Notes in certain circumstances, LGII and Loewen do not intend to register the Outstanding Notes under the Securities Act and, after consummation of the Exchange Offer, will not be obligated to do so. In addition, any holders of Outstanding Notes who tender in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Further, as a result of the Exchange Offer, it is expected that a substantial decrease in the aggregate principal amount of Outstanding Notes outstanding will occur. As a result, it is unlikely that a liquid trading market will exist for the Outstanding Notes at any time. This lack of liquidity will make transactions more difficult and may reduce the trading price of the Outstanding Notes. See "The Exchange Offer" and "Description of Exchange Notes--Registration Rights Agreement." PENDING CLASS ACTIONS The Company currently is involved in three class action lawsuits that have been consolidated for pre-trial proceedings (the "Class Actions") which were commenced against Loewen, LGII and certain affiliates and officers of the Company when the price of the Common Shares fell in response to the announcement of the Gulf 14 National award (as defined). The Company has determined that it is not possible to predict the final outcome of the Class Actions, and that it is not possible to establish at this time a reasonable estimate of possible damages, if any, or reasonably to estimate the range of possible damages, if any, that may be awarded to the plaintiffs in the Class Actions. Accordingly, the Company cannot predict whether the ultimate outcome of the Class Actions (including settlement) will have a material adverse effect on the Company's financial position, results of operation, or liquidity. See "Legal Proceedings." ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES There is no existing public market for the Exchange Notes, nor can there be any assurance that a public market will develop. Certain of the Initial Purchasers have advised LGII that they intend to make a market in the Exchange Notes; however, the Initial Purchasers are not obligated to do so and any market making may be discontinued at any time without notice. 15 RECENT DEVELOPMENTS FIRST QUARTER 1996 RESULTS For the three months ended March 31, 1996, the Company reported consolidated revenue increased 48.5% to $193.1 million from $130.1 million for the three months ended March 31, 1995. Consolidated gross margin increased 37.2% to $73.5 million in 1996 from $53.6 million in 1995, with funeral gross margin increasing 18.9% and cemetery gross margin increasing 151.8%. ACQUISITION PROGRAM From January 1, 1996 to June ., 1996, the Company closed approximately $. million of funeral home, cemetery and related acquisitions. As at June ., 1996, the Company has signed agreements for additional acquisitions aggregating approximately $. million ("Signed Acquisitions"), the majority of which the Company expects to close prior to the end of 1996, for a total of approximately $. million. In addition, as at June ., 1996, the Company was in the process of evaluating or negotiating prospective acquisitions in competition with other potential purchasers. The Company does not expect that all such potential acquisitions will be completed during 1996, if at all. Several of such potential acquisitions, one or more of which may be completed in 1996, would be considered significant based on acquisition price. See "Business--Future Acquisitions." LITIGATION SETTLEMENTS In November 1995, a Mississippi state court jury awarded J.J. O'Keefe, Sr., Gulf National Insurance Company and certain affiliates (collectively, "Gulf National") $100 million in compensatory damages and $400 million in punitive damages (the "Gulf National award") for claims arising out of a 1991 lawsuit alleging breach of contract and related causes of action against Loewen, LGII and two indirect subsidiaries (the "Company Defendants"). On February 1, 1996, Gulf National and the Company Defendants executed a settlement agreement pursuant to which, among other things, the parties agreed to a full mutual release of all claims, and the Company Defendants agreed to deliver to Gulf National or its designees $50 million in cash, 1.5 million Common Shares (the "Gulf National Settlement Shares") and a promissory note in the amount of $80 million, payable over 20 years in equal annual installments of $4 million, without interest (the "Gulf National settlement"). In connection with the issuance of Common Shares pursuant to the Gulf National settlement, on February 9, 1996, Loewen, LGII, Gulf National and certain other parties entered into a shareholders' agreement, providing for, among other things, a price guarantee of $30 per share in certain circumstances on the Common Shares, a voting agreement and a right of first refusal in favor of Loewen. In April 1992, Provident American Corporation and a subsidiary (together, "Provident") commenced a lawsuit against Loewen and LGII claiming compensatory and punitive damages arising out of terminated negotiations relating to a pre- need funeral insurance marketing arrangement. On February 12, 1996, Provident, Loewen and LGII agreed to settle the litigation. On March 19, 1996, the parties entered into a settlement agreement whereby, among other things, the parties agreed to a full mutual release of all claims, and Provident received from the Company one million Common Shares with a price guarantee of $27 per share in certain circumstances (the "Provident Settlement Shares") and $3 million in cash (together with the Provident Settlement Shares, the "Provident settlement"). See "Legal Proceedings" for further information regarding the Gulf National and Provident settlements. 1995 RESULTS The results for the year ended December 31, 1995 were significantly affected by the Gulf National award in November 1995 and the Gulf National and Provident settlements during the first quarter of 1996. The related costs are reflected primarily in the results for the three months ended December 31, 1995. For that period, the 16 Company recorded a net loss of $113.2 million as compared to net earnings of $11.4 million in the same period of 1994. For the year ended December 31, 1995, the Company recorded a net loss of $76.7 million compared to net earnings of $38.5 million in 1994. Consolidated revenue increased 43.8% to $599.9 million in the year ended December 31, 1995 from $417.3 million in 1994, with funeral revenue increasing 25.1% and cemetery revenue increasing 126.4%. Consolidated gross margin increased 42.8% to $226.8 million in 1995 from $158.9 million in 1994. As a percentage of revenue, funeral gross margin increased to 41.5% in 1995 from 40.5% in 1994 and cemetery gross margin increased to 27.8% in 1995 from 24.3% in 1994 and as a result of the change in mix between funeral and cemetery operations, the combined gross margin decreased to 37.8% in 1995 from 38.1% for the same period in 1994. Funeral revenue increased 25.1% to $442.8 million in 1995 compared with $353.9 million in 1994, primarily due to acquisitions. The funeral revenue from locations in operation for all of 1994 and 1995 ("Established Locations") increased by $7.5 million while corresponding funeral gross margins increased from 40.6% to 42.1%. With the implementation of merchandising programs and inflation-based price increases, the Company was able to more than offset a 1.3% decline in the number of funeral services performed at Established Locations. Cemetery revenue increased 126.4% to $143.6 million in 1995 compared with $63.4 million in 1994, primarily due to acquisitions. Cemetery gross margin increased to 27.8% in 1995 from 24.3% in 1994, primarily as a result of increased sales activity and the integration of acquisitions with a higher cemetery gross margin. The cemetery revenue from Established Locations increased by $12 million, while corresponding cemetery gross margins increased from 26.6% to 29.0%, both principally due to a higher level of pre-need sales at higher margins. In addition to its focus on quality at-need funeral and cemetery services, the Company provides advanced funeral and cemetery planning to the communities it serves. In 1995, approximately 16.0% of the funeral services performed by the Company were prearranged, an increase from 14.8% in 1994. During 1995, the Company sold approximately 28,000 funeral services to families planning in advance compared with approximately 24,000 funeral services in 1994. In 1995, approximately 60.9% of the Company's cemetery revenue was generated from pre- need cemetery planning compared with 53.1% in 1994. The Company expects that approximately 66% of its cemetery revenue will be generated from pre-need planning in 1996. Notes 1 and 4 to the Company's 1995 Consolidated Financial Statements provide information regarding the accounting treatment of pre-need sales. Insurance revenue in 1995 was $13.5 million. The Company determined in 1995 that it would not, as previously planned, sell a life insurance subsidiary which had been acquired in connection with a larger acquisition in 1994 with the intent that it be sold. The subsidiary was accounted for at cost from the date of acquisition to June 30, 1995. Beginning July 1, 1995, the Company reported the operations of the life insurance subsidiary on a consolidated basis. On March 26, 1996, the Company purchased certain net assets of S.I. Acquisitions Associates, L.P., which included two insurance companies. United States based operations contributed 91.3% of 1995 consolidated revenue compared with 88.4% in 1994. For the year ended December 31, 1995, general and administrative expenses increased 94.7% to $67.7 million from $34.8 million in 1994. As a percentage of consolidated revenue, general and administrative expenses in 1995 were 11.3% as compared with 8.3% in 1994. Included in general and administrative expenses in 1995, and principally in the fourth quarter, are litigation, acquisition and other expenses, including $10.8 million for professional fees and other costs related to the Gulf National and Provident litigation and settlements, and a $3.5 million write-off of acquisition costs. The remaining increase in general and administrative expenses can be attributed to an expansion of the Company's infrastructure as a result of the integration of acquired operations. 17 Interest expense on long-term debt increased by $16.7 million in 1995 primarily as a result of additional borrowings by the Company to finance its acquisitions. The Company's credit ratings were reduced as a result of the Gulf National award. Until the credit ratings are raised to the investment grade ratings applied to the Company prior to the Gulf National award, the Company's cost of borrowing will be higher than that experienced in 1995. The dividends on preferred securities of an associated entity, Loewen Group Capital, L.P. ("LGCLP"), increased from $2.7 million to $7.1 million as a result of the Monthly Income Preferred Securities (the "MIPS") issued by LGCLP in 1994 being outstanding for a full year. See Note 8 to the Company's 1995 Consolidated Financial Statements for particulars of the MIPS. The Company recorded an expense of $165.0 million for the year ended December 31, 1995 for the Gulf National and Provident settlements announced on January 29, 1996 and February 12, 1996, respectively. The accrual of $135.0 million for the Gulf National settlement consisted of (i) $50.0 million recorded in current liabilities in respect of a cash payment made in February 1996, (ii) $45.0 million recorded in shareholders' equity for the issue of 1.5 million Common Shares in February 1996 with a price guarantee of $30 per share in certain circumstances, and (iii) $40.0 million recorded as long-term debt representing the discounted value of a non-interest bearing promissory note dated January 31, 1996 with payments of $4.0 million per annum over 20 years. See "Legal Proceedings--Gulf National Settlement." The accrual of $30 million for the Provident settlement consisted of (i) $3.0 million recorded in current liabilities in respect of a payment made March 19, 1996 and (ii) $27.0 million recorded in shareholders' equity for the issue in March 1996 of one million Common Shares with a price guarantee of $27 in certain circumstances. See "Legal Proceedings--Provident Settlement." The deferred income tax benefit of $60.3 million from the Gulf National and Provident settlements has been recorded as a deferred income tax asset. Prior to the tax recovery from the Gulf National and Provident settlements, income taxes were $13.2 million, an effective rate of 32.0%, compared with $19.7 million in 1994, an effective rate of 33.9%. The decrease in the effective tax rate in 1995 was primarily due to the expansion of the Company's international financing arrangements. As a result of the above, the Company shows a net income tax recovery of $47.2 million versus a net income tax expense of $19.7 million in 1994. As a result of litigation during 1995 and the resulting Gulf National and Provident settlements, litigation-related finance costs, aggregating $19.9 million, were expensed in 1995. These finance costs included (i) $7.4 million of finance costs incurred as a result of posting a $125 million bond in connection with the appeal of the Gulf National award, (ii) $3.9 million for amendment of bank facilities due to litigation and write-off of related existing deferred financing costs, and (iii) $8.6 million including $7.1 million for the termination of interest rate agreements and a $1.5 million unrealized loss with respect to interest rate agreements entered into in anticipation of a long-term debt issue that was aborted as a result of the Gulf National award. The cash provided from operations for 1995 decreased from $43.3 million to $13.2 million primarily as a result of increased expenses associated with the Gulf National litigation and increases in required working capital and other non-cash balances arising from the additional cemetery operations. As at December 31, 1995, there was a working capital deficiency arising from the $53 million accrual for the cash payments required to be made in 1996 under the Gulf National and Provident settlements. The $50 million payment for the Gulf National settlement was funded in 1996 by borrowings under the Company's credit facilities. Cash provided from operations also reflects Common Shares and debt to be issued under legal settlements which will be reflected as cash applied to operations in 1996. 18 USE OF PROCEEDS The net proceeds from the sale of the Outstanding Notes and the net proceeds from the concurrent 1996 Equity Offering generally were used to repay indebtedness outstanding under the Multi-Currency Revolver. The amount by which the aggregate net proceeds exceeded the then outstanding balance on the Multi-Currency Revolver was approximately $83 million, which amount was added to cash and marketable securities of the Company for working capital and other general corporate purposes, including future acquisitions. This Exchange Offer is intended to satisfy certain obligations of LGII and Loewen under the Registration Rights Agreement. Neither LGII nor Loewen will receive any proceeds from the issuance of the Exchange Notes offered hereby. In consideration for issuing the Exchange Notes as contemplated in this Prospectus, LGII will receive Outstanding Notes in like principal amount. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the respective Outstanding Notes, except as otherwise described herein under "The Exchange Offer--Terms of the Exchange Offer." The Outstanding Notes surrendered in exchange for Exchange Notes will be retired and cancelled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any increase in the outstanding debt of LGII or Loewen. CONSOLIDATED CAPITALIZATION The following table sets forth the cash and marketable securities and total capitalization of the Company as at March 31, 1996, adjusted to reflect (i) the exchange of all Series C Receipts not exchanged as of March 31, 1996 for Series C Preferred Shares for additional net proceeds of approximately $70 million (see "Prospectus Summary--1996 Financings"), (ii) the net proceeds of approximately $19 million from the exercise of the underwriters' over- allotment option with respect to the 1996 Equity Offering, (iii) completion of the New Bank Facility and repayment in full of the Multi-Currency Revolver and (iv) the exchange of all of the Outstanding Notes for Exchange Notes pursuant to the Exchange Offer. Because the Outstanding Notes surrendered in exchange for Exchange Notes will be retired and cancelled and cannot be reissued, whether none, some or all of the Exchange Notes are issued pursuant to the Exchange Offer will not result in any change in the outstanding long-term debt of LGII or Loewen. For purposes of the following table only, the remaining net proceeds from the 1996 Preferred Share Offering and the exercise of the underwriters' over-allotment option with respect to the 1996 Equity Offering are translated into U.S. dollars at the March 31, 1996 rate of U.S.$1.00 = Cdn.$1.3591.
AS AT MARCH 31, 1996 ----------------------- ACTUAL AS ADJUSTED ---------- ----------- (IN THOUSANDS) Cash and marketable securities........................ $ 32,608 $ 32,608 ========== ========== Short-term debt, including current portion of long- term debt............................................ $ 97,025 $ 97,025 ---------- ---------- Long-term debt New Bank Facility................................... 0 84,000 Outstanding Notes................................... 350,000 0 Exchange Notes...................................... 0 350,000 Senior guaranteed notes, Series A-E................. 246,600 246,600 Multi-Currency Revolver............................. 84,000 0 Canadian Revolver................................... 28,979 28,979 Term credit facilities.............................. 141,759 141,759 Other long-term debt................................ 157,754 157,754 Less current portion................................ (97,025) (97,025) ---------- ---------- Total long-term debt................................ 912,067 912,067 Preferred securities of subsidiary (1)................ 75,000 75,000 Total shareholders' equity............................ 923,796 1,012,903 ---------- ---------- Total capitalization.................................. $2,007,888 $2,096,995 ========== ==========
- -------- (1) Reference is made to Note 8 to the Company's 1995 Consolidated Financial Statements for particulars of the preferred securities of subsidiary. 19 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Outstanding Notes were sold by the Company on March 20, 1996 to the Initial Purchasers, who then sold the Outstanding Notes to certain institutional investors. In connection with the sale of the Outstanding Notes, LGII and Loewen and the Initial Purchasers entered into the Registration Rights Agreement, pursuant to which LGII and Loewen agreed (i) to file a registration statement with respect to an offer to exchange the Outstanding Notes for senior subordinated debt securities of LGII with terms substantially identical to the Outstanding Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions) within 45 days after the date of original issuance of the Outstanding Notes and (ii) to use their best efforts to cause such registration statement to become effective under the Securities Act within 120 days after such issue date. If applicable law or interpretations of the staff of the Commission do not permit the Company to file the registration statement containing this Prospectus or to effect the Exchange Offer, or if certain holders of the Outstanding Notes notify the Company that they are not permitted to participate in, or would not receive freely tradable Exchange Notes pursuant to, the Exchange Offer, the Company will use its best efforts to cause to become effective the Shelf Registration Statement with respect to the resale of the Outstanding Notes and to keep the Shelf Registration Statement effective until 180 days after the effective date thereof. The interest rate on the Outstanding Notes is subject to increase under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreements. See "Description of the Exchange Notes--Registration Rights Agreement." Unless the context requires otherwise, the term "holder" with respect to the Exchange Offer means the registered holder of Notes or any other person who has obtained a properly completed bond power from a registered holder. RESALE OF EXCHANGE NOTES Based on interpretations by the staff of the Commission set forth in no action letters issued to third-parties, LGII and Loewen believe that, except as described below, Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by respective holders thereof without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such Exchange Notes are acquired in the ordinary course of such holder's business and (ii) such holder does not intend to participate in, has no arrangement or understanding with any person to participate in, and is not engaged in and does not intend to engage in, a distribution of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of LGII or Loewen within the meaning of Rule 405 under the Securities Act or that is a broker-dealer that purchased Outstanding Notes from the Company to resell pursuant to an exemption from registration, (a) cannot rely on such interpretations by the staff of the Commission, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer and, (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of such Outstanding Notes. Any holder who tenders in the Exchange Offer with the intention or for the purpose of participating in a distribution of the Exchange Notes cannot rely on such interpretation by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Unless an exemption from registration is otherwise available, any such resale transaction should be covered by an effective registration statement containing the selling security holders information required by Item 507 of Regulation S-K under the Securities Act. This Prospectus may be used for an offer to resell, resale or other retransfer of Exchange Notes only as specifically set forth herein. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker- dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, LGII will accept for exchange any and all Outstanding Notes properly tendered and not withdrawn prior to 5:00 20 p.m., New York time, on the Expiration Date. LGII will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of Outstanding Notes surrendered pursuant to the Exchange Offer. Outstanding Notes may be tendered only in integral multiples of $1,000. The form and terms of the Exchange Notes will be the same as the form and terms of the Outstanding Notes, except that the Exchange Notes will be registered under the Securities Act and hence will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Outstanding Notes. The Exchange Notes will be issued under and entitled to the benefits of the Indenture, which also authorized the issuance of the Outstanding Notes, such that the Series 1 Notes and the Series 3 Exchange Notes will be treated as a single class of senior notes under the Indenture, and the Series 2 Notes and the Series 4 Exchange Notes will be treated as a single class of senior notes under the Indenture. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Outstanding Notes being tendered for exchange. Holders of Outstanding Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. As of the date of this Prospectus, $350,000,000 aggregate principal amount of the Outstanding Notes are outstanding. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders of Outstanding Notes. There will be no fixed record date for determining registered holders of Outstanding Notes entitled to participate in the Exchange Offer. LGII intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Securities Act, and the rules and regulations of the Commission thereunder. Outstanding Notes which are not tendered for exchange in the Exchange Offer will remain outstanding and continue to accrue interest but will not retain any rights under the Registration Rights Agreement. LGII shall be deemed to have accepted for exchange properly tendered Outstanding Notes when, as and if LGII shall have given oral or written notice thereof to the Exchange Agent and complied with the applicable provisions of the Registration Rights Agreement. The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the Exchange Notes from LGII. LGII expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Outstanding Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions specified below under "--Certain Conditions to the Exchange Offer." Holders who tender Outstanding Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Outstanding Notes pursuant to the Exchange Offer. LGII will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York time on , 1996, unless LGII, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. The Exchange Offer will not in any event be extended to a date beyond , 1996. In order to extend the Exchange Offer, LGII will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m., New York time, on the next business day after the then Expiration Date. LGII reserves the right, in its sole discretion, (i) to delay accepting for exchange any Outstanding Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Certain Conditions to the Exchange Offer" shall have occurred, shall exist or shall not have been satisfied, 21 by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of Outstanding Notes. If the Exchange Offer is amended in a manner determined by LGII to constitute a material change, LGII and Loewen will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, and LGII will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. INTEREST ON THE EXCHANGE NOTES The Series 3 Exchange Notes will bear interest at the rate of 7 1/2% per annum and the Series 4 Exchange Notes will bear interest at the rate of 8 1/4% per annum, payable semi-annually on April 15 and October 15 of each year, commencing October 15, 1996, to holders of record on the immediately preceding April 1 and October 1, respectively. Holders of the Exchange Notes will receive interest on October 15, 1996 from the date of initial issuance of the Outstanding Notes. Interest on the Outstanding Notes accepted for exchange will cease to accrue upon issuance of the respective Exchange Notes. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other term of the Exchange Offer, LGII will not be required to accept for exchange, or exchange any Exchange Notes for, any Outstanding Notes, and may terminate the Exchange Offer as provided herein before the acceptance of any Outstanding Notes for exchange, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in LGII's reasonable judgment, might materially impair the ability of LGII to proceed with the Exchange Offer; or (b) any law, statute, rule or regulation is proposed, adopted or enacted, or any existing law, statute, rule or regulation is interpreted by the staff of the Commission, which, in LGII's reasonable judgment, might materially impair the ability of LGII to proceed with the Exchange Offer; or (c) any governmental approval has not been obtained, which approval LGII shall, in its reasonable judgment, deem necessary for the consummation of the Exchange Offer as contemplated hereby. LGII expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Outstanding Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified above. LGII will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the Outstanding Notes as promptly as practicable, such notice in the case of any extension to be issued no later than 9:00 a.m., New York time, on the next business day after the previously scheduled Expiration Date. The foregoing conditions are for the sole benefit of LGII and may be asserted by LGII regardless of the circumstances giving rise to any such condition or may be waived by LGII in whole or in part at any time and from time to time in its reasonable judgment. The failure by LGII at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, LGII will not accept for exchange any Outstanding Notes tendered, and no Exchange Notes will be issued in exchange for any such Outstanding Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended. PROCEDURES FOR TENDERING Only a holder of Outstanding Notes may tender such Outstanding Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or facsimile thereof, 22 have the signature thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior to 5:00 p.m., New York time, on the Expiration Date. In addition, either (i) Outstanding Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry Confirmation") of such Outstanding Notes, if such procedure is available, into the Exchange Agent's account at the Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below must be received by the Exchange Agent prior to the Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the Letter of Transmittal and other required documents must be received by the Exchange Agent at the address set forth below under "The Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York time, on the Expiration Date. The tender by a holder which is not withdrawn prior to 5:00 p.m., New York time, on the Expiration Date will constitute an agreement between such holder and LGII in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO LGII OR LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Outstanding Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender, should contact the registered holder promptly and instruct such registered holder of Outstanding Notes to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in such owner's name or obtain a properly completed bond power from the registered holder of Outstanding Notes. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. Each holder of Outstanding Notes who wishes to exchange Outstanding Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it is not engaged in and does not intend to engage in a distribution of the Exchange Notes and (iii) it is not an "affiliate" of LGII or Loewen, within the meaning of Rule 405 under the Securities Act, or, if it is an affiliate of LGII or Loewen, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Signatures on a Letter of Transmittal or a notice of withdrawal described below, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If signatures on a Letter Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantor must be a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (an "Eligible Institution"). 23 If the Letter of Transmittal is signed by a person other than the registered holder of any Outstanding Notes listed therein, such Outstanding Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Outstanding Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Outstanding Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by LGII, evidence satisfactory to LGII of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered Outstanding Notes will be determined by LGII in its sole discretion, which determination will be final and binding. LGII reserves the absolute right to reject any and all Outstanding Notes not properly tendered or any Outstanding Notes if acceptance would, in the opinion of counsel for LGII, be unlawful. LGII also reserves the right to waive any defects, irregularities or conditions of tender as to particular Outstanding Notes. LGII's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as LGII shall determine. Although LGII intends to notify holders of defects or irregularities with respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In all cases, issuance of Exchange Notes for Outstanding Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of Outstanding Notes or a timely Book- Entry Confirmation of such Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Outstanding Notes are not accepted for exchange for any reason set forth in the terms and conditions of the Exchange Offer or if Outstanding Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Outstanding Notes will be returned without expense to the tendering holder thereof (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book- Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such non-exchanged Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Outstanding Notes by causing the Book-Entry Transfer Facility to transfer such Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Outstanding Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "--Exchange Agent" on or prior to the Expiration Date or, if the guaranteed delivery procedures described below are to be complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. 24 GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available or (ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the registered number(s) of such Outstanding Notes and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three (3) New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as all tendered Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within three (3) New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Outstanding Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be timely received by the Exchange Agent at one of the addresses set forth below under "--Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes to be withdrawn (including the principal amount of such Outstanding Notes), and (where certificates for Outstanding Notes have been transmitted) specify the name in which such Outstanding Notes were registered, if different from that of the withdrawing holder. If certificates for Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Outstanding Notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Outstanding Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by LGII, whose determination shall be final and binding on all parties. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Outstanding Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to the Expiration Date. 25 EXCHANGE AGENT Fleet National Bank has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Hand: By Registered or Certified Mail or Courier: Fleet National Bank Fleet National Bank Corporate Trust Operations Corporate Trust Operations 777 Main Street, Lower Level 777 Main Street, Lower Level Hartford, Connecticut 06115 CTMO 0224 Attn: Patricia Williams Hartford, Connecticut 06115 By Facsimile: Attn: Patricia Williams (860) 986-7908 (For Eligible Institutions Only) Confirm by Telephone: (860) 986-1271 FEES AND EXPENSES The expenses of soliciting tenders will be borne by LGII. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company. LGII has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to broker-dealers or others soliciting acceptances of the Exchange Offer. LGII, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by LGII and are estimated in the aggregate to be approximately $ . . Such expenses include registration fees, fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, and related fees and expenses. TRANSFER TAXES LGII will pay all transfer taxes, if any, applicable to the exchange of Notes pursuant to the Exchange Offer. If, however, certificates representing Outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Notes tendered, or if tendered Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer, as set forth in the legend thereon, as a consequence of the issuance of the Outstanding Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. LGII does not currently anticipate that it will register the Outstanding Notes under the Securities Act. See "Risk Factors--Consequences of Failure to Exchange; Possible Adverse Effect on Trading Market for Outstanding Notes." 26 BUSINESS OVERVIEW The Company operates the second-largest number of funeral homes and cemeteries in North America and the largest number of funeral homes in Canada. The Company also engages in the pre-need selling of funeral services through its operating locations and the pre-need selling of cemetery and cremation services through certain of its operating locations. As at June ., 1996, the Company operated . funeral homes (not all of which are wholly owned) throughout North America. This included . funeral homes in the United States (including locations in Puerto Rico) and . funeral homes in Canada. In addition, as at such date, the Company operated . cemeteries in the United States and . cemeteries in Canada. As at the close of business on June ., 1996, the Company had negotiated agreements for the acquisition of a further . funeral homes and . cemeteries in the United States and . funeral homes in Canada. See "--Growth Strategy." Consideration paid for acquired operations totaled approximately $265 million for the quarter ended March 31, 1996, compared to consideration of approximately $149 million for operations acquired during the same period in 1995. Consideration paid for acquired operations totaled approximately $265.6 million in 1994 and $487.9 million in 1995. Despite this growth, the Company has maintained consistent margins, including a gross margin of at least 37%. The Company's management structure and remuneration practices are designed to support and encourage entrepreneurial drive and individual responsibility. Each funeral home and cemetery is operated as a distinct profit center, with monthly and annual financial performance monitored by regional and corporate management in accordance with budgeted projections. Local managers are given a high degree of autonomy. The Company believes that its funeral home and cemetery managers, as members of the local community, are best able to judge how to conduct day-to-day operations in a manner consistent with the established character of the particular firm and the needs of the community. THE FUNERAL SERVICE INDUSTRY The funeral service industry historically has been characterized by low business risk compared with most other businesses. According to the 1993 Business Failure Record published by The Dun & Bradstreet Corporation, the average business failure rate in the United States in 1993 was 109 per 10,000. The 1993 failure rate of the funeral services and crematoria industry was 24 per 10,000, among the lowest of all industries. Management believes this low failure rate is the result of a number of factors, including customers' tendencies to select a funeral home based on reputation for quality service rather than price and the number of years required to establish a caring reputation in the community. Further, the funeral service industry historically has not been significantly affected by economic or market cycles. Future demographic trends are expected to contribute to the continued stability of the funeral service industry. The U.S. Department of Commerce, Bureau of the Census, projects that, reflecting the well-publicized "graying of America" as the baby boom generation reaches old age, the number of deaths in the United States will grow at approximately 1.0% annually from 1990 through 2010. The following table reflects the actual or estimated number of deaths in the United States and the percentage of the total United States population over 65 and over 75.
PERCENTAGE OF TOTAL POPULATION DEATHS ---------------- (MILLIONS) OVER 65 OVER 75 ---------- -------- -------- 1980.......................................... 1.99 11.3% 4.4% 1985.......................................... 2.09 11.8 4.8 1990.......................................... 2.15 12.5 5.2 1995 (est.)................................... 2.21 12.8 5.6 2000 (est.)................................... 2.36 12.8 6.1 2010 (est.)................................... 2.60 13.3 6.4
- -------- Source: U.S. Department of Commerce, Bureau of the Census, Current Population Reports: Population Estimates and Projections. Series P-25, 1018. 27 In addition, the funeral service industry in North America is highly fragmented, consisting primarily of small, stable, family-owned businesses. Management estimates that notwithstanding the increasing trend toward consolidation over the last few years, only approximately 9% of the 23,500 funeral homes and approximately 6% of the 11,000 cemeteries in North America currently are owned and operated by the five largest publicly-traded North American funeral service companies. GROWTH STRATEGY The Company capitalizes on the foregoing industry fundamentals through a growth strategy that emphasizes three principal components: (i) acquiring a significant number of small, family-owned funeral homes and cemeteries; (ii) acquiring "strategic" operations consisting predominantly of large, multi- location urban properties that generally serve as platforms for acquiring small, family-owned businesses in surrounding regions; and (iii) improving the revenue and profitability of newly-acquired and established locations. The following table provides historical data on the Company's acquisition program during the years ended December 31, 1995, 1994 and 1993.
YEAR ENDED DECEMBER 31, -------------------- 1995 1994 1993 ------ ------ ------ (DOLLARS IN MILLIONS) Funeral homes acquired.................................... 177 110 83 Cemeteries acquired....................................... 64 46 33 Consideration............................................. $487.9 $265.6 $148.0
From January 1 through June ., 1996, the Company acquired . funeral homes and . cemeteries for total consideration of approximately . million. Family-Owned Businesses The first element of the Company's growth strategy is the acquisition of small, family-owned funeral homes and cemeteries. Management believes that the Company has a competitive advantage in this market due to its culture and its well-known and understood reputation for honoring existing owners and staff. Strategic Acquisitions The second element of the Company's growth strategy is the acquisition of large, multi-location urban properties. The Company entered into commitments for or consummated several "strategic" acquisitions during 1995. Osiris In March 1995, the Company purchased all of the outstanding shares of Osiris Holding Corporation of Philadelphia, Pennsylvania which operated 22 cemeteries, four funeral home/cemetery combinations and one funeral home, all located in the United States. The Osiris purchase has complemented the Company's existing locations, as the Osiris locations were in markets in which the Company did not have a strong presence. In addition, the Osiris acquisition has provided the Company with an experienced cemetery management team which will benefit the Company's other cemetery operations. The total consideration for the transaction was $103.8 million plus additional consideration of up to approximately $42 million payable to the former shareholders of Osiris if certain performance related criteria are achieved over a period of up to six years from the closing of the acquisition. For financial reporting purposes, such additional consideration, if any, is accrued as a liability once the likely outcome with respect to its payment is determinable beyond a reasonable doubt. The Company has determined that, as at December 31, 1995, the performance-related criteria would likely be met over the term of the agreement and, accordingly, has allocated $35.3 million representing the present value of additional consideration to cemetery property and accrued a corresponding liability of $35.3 million. The full amount of any unpaid contingent consideration will be immediately payable in certain events, including the death, permanent disability, or termination of employment without cause, of either of two former shareholders of Osiris who are now part of the Company's senior management. 28 MHI In September 1995, the Company acquired MHI Group, Inc., a public company that operated 16 funeral homes and five cemeteries in Florida and Colorado. The total cost of the acquisition was approximately $86 million. S.I. Acquisition Associates, L.P. In March 1996, the Company acquired from S.I. Acquisition Associates, L.P. certain funeral, cemetery and insurance assets, including 15 funeral homes, two cemeteries and two insurance companies, all located in Louisiana. The total cost to the Company of the acquisition was approximately $140 million. Investment in Prime Succession, Inc. On June 17, 1996, Loewen and Blackstone Capital Partners II Merchant Banking Fund L.P. ("Blackstone") announced the signing of an agreement (the "Agreement") to acquire the shares of Prime Succession, Inc. ("Prime"). Prime is the largest privately-held funeral services company in North America, with 146 funeral homes and 16 cemeteries across the United States. A new entity formed by Loewen and Blackstone ("Newco") will acquire Prime for approximately $295 million. Blackstone will contribute approximately $48 million, for which it will receive a controlling interest in Newco. Blackstone also will control the Board of Directors of Newco. Loewen will contribute approximately $72 million (a portion of which was paid at signing) and will receive common equity and approximately $62 million of preferred stock with an annual payment-in-kind dividend of 10%. The Agreement also provides that Loewen has a call option that can be exercised on the fourth anniversary of the closing date and for two years thereafter, during which Loewen can acquire Blackstone's interest in Newco. In addition, Blackstone has a put option that can be exercised beginning on the sixth anniversary of the closing date and for two years thereafter, during which Blackstone can require Loewen to acquire its interest in Newco. The option price, in either case, will be based on a formula involving cash flow from operations. The acquisition, which is expected to be completed by mid-September 1996, is subject to a number of conditions, including regulatory approval and the ability of Newco to obtain financing. Until August 15, 1996, Newco can elect not to proceed with the transaction if Newco determines that financing cannot be obtained. In such event, Loewen has the sole option to (i) forfeit amounts previously paid or (ii) make an additional payment and complete the Prime acquisition directly for its own benefit by November 15, 1996 (and forfeit amounts previously paid if the acquisition is not consummated). If Loewen ultimately forfeits amounts previously paid, Loewen would be required to write off such amounts and related costs and expenses. Any such write-offs would have a material adverse effect on Loewen's financial results for the period and year in which such write-off occurs. Growth through Integration The final element of the Company's growth strategy is its focus on enhancing the revenue and profitability of newly-acquired and established operations. Through the Company's integration process, newly-acquired funeral homes typically show an immediate improvement in gross margin due in part to the significant economies of scale offered by the Company. The Company believes that newly-acquired cemeteries will also show an improvement in gross margin over time. Cemetery operations are predominantly sales driven with a steady "at-need" revenue base. Management believes that gross margins will increase as cost efficiencies are achieved and revenue is enhanced through improved sales efforts. 29 The Company continues to increase the revenue and profitability of established operations through the introduction of additional merchandising, cost control programs and inflation based pricing. On an ongoing basis, the Company also seeks to improve the market share and earnings of its established operations by helping local managers to market services more effectively and to enhance the reputation of their operations in the community. FUTURE ACQUISITIONS At the close of business on June ., 1996, the Company had signed agreements, some of which are non-binding, for the acquisition of . additional funeral homes and . additional cemeteries aggregating approximately . million. The Company expects to close most of the Signed Acquisitions by the end of of 1996. In addition, as at June ., 1996, the Company was in the process of evaluating or negotiating prospective acquisitions in competition with other potential purchasers. Several of such potential acquisitions, one or more of which may be completed in 1996, would be considered significant based on acquisition price. The Company is not able at this time to determine the number or aggregate purchase price of the prospective acquisitions to which the Company may become committed. The Company does not expect that all such acquisitions will be completed during 1996, if at all. ACQUISITION FUNDING The timing and certainty of completion of Signed Acquisitions and future acquisitions are based on many factors, including the availability of financing. The Company will continue to finance acquisitions with a combination of debt and equity offerings and credit facilities. The Company believes that it will have sufficient funding for all Signed Acquisitions. Funding for future acquisitions will be provided in part by the New Bank Facility and by additional equity and debt offerings and credit facilities. There can be no assurance that funds will be available to complete all future acquisitions. Accordingly, there is no assurance that the Company will complete any specific number or dollar amount of acquisitions in a particular year. The Company currently has a policy to include provisions in its acquisition agreements requiring binding arbitration for disputes arising out of such contracts. Under such policy, the Board of Directors may approve omission of such provisions in an acquisition agreement, in certain circumstances including acquisition agreements that involve payment of all or a portion of the purchase price in Common Shares. There can be no assurance that any such provision will be enforceable by the Company or that the outcome of any arbitration would be more favorable to the Company than the outcome of a court trial on the same facts and claims. BUSINESS OPERATIONS Funeral Homes The Company's funeral homes offer a full range of funeral services, which encompass the collection of remains, registration of death, professional embalming, use of funeral home facilities, sale of caskets and related merchandise, transportation to a place of worship or funeral chapel for a religious service and transportation to a cemetery or crematorium. To provide the public with the opportunity to choose the service that is most appropriate from both an emotional and financial perspective, the Company offers complete funeral services (including caskets and related merchandise) at prices ranging from approximately $750 to $7,500 (and averaging approximately $3,500). Cremation rates vary considerably from one region of North America to another. The Company has operations in regions with both high and low cremation rates. As a percentage of total funeral services, cremations in North America have been increasing by approximately 1% annually over the past five years. However, because the number of deaths has been increasing, industry information reflects that the number of caskets sold (typically associated with a traditional funeral service) has remained constant. The Company has proprietary programs to provide a full range of service alternatives to families choosing cremation. 30 The services offered by funeral homes can be purchased at the time of death ("at-need") or in advance through a prearranged agreement ("pre-need"). Prearranged funeral services enable the family to select the type of service and merchandise in advance at prices prevailing at the time of selection. The Company believes that families in large urban markets are more aware of and are more willing to purchase funeral products and services in advance. The Company recognizes that the increasing demand for advanced funeral and cemetery planning is a natural extension of the service and care it offers families, and is committed to providing quality advanced funeral and cemetery planning to the communities it serves. As the Company has increased its presence in large urban markets, it has significantly expanded its efforts to sell prearranged funeral services in those markets. For example, the Company now has 20 regional marketing centers that focus primarily on advanced funeral planning. In order to protect and enhance its market share in these large urban markets, management believes that the Company will need to continue to implement programs designed to increase pre-need sales. Payments made for pre-need contracts are either placed in trust by the Company or are used on behalf of the purchaser of the pre-need contract to pay premiums on life insurance policies under which the Company is designated the beneficiary. At the date of performing a prearranged service, the Company records as funeral revenue the amount originally trusted or the insurance contract amount, together with all related accrued trust earnings and increased insurance benefits. Cemeteries The Company's cemetery division assists families in making at-need and pre- need arrangements and offers a complete line of cemetery products (including a selection of burial spaces, burial vaults, lawn crypts, memorials, niches and mausoleum crypts), the opening and closing of graves and cremation services. The sale of cemetery pre-need arrangements is a significant component of the cemetery operations. In 1995, 60.9% of cemetery revenue resulted from pre-need sales, compared with 53.1% in 1994. The pre-need sale of interment rights and other related products is recorded as revenue when customer contracts are signed and, concurrently, related costs are recorded and an allowance is established for customer cancellations and refunds based on management's estimates of expected cancellations. Actual cancellation rates in the future may result in a change in the estimate. Insurance The Company determined in 1995 that it would not, as previously planned, sell a life insurance subsidiary which had been acquired in connection with a larger acquisition in 1994 with the intent that is be sold. The subsidiary was accounted for at cost from the date of acquisition to June 30, 1995. Beginning July 1, 1995, the Company reported the operations of the life insurance subsidiary on a consolidated basis. On March 26, 1996, the Company purchased certain net assets of S.I. Acquisition Associates, L.P., which included two insurance companies.. COMPETITION Competition generally arises from two sources in the funeral industry. Local community competition is oriented towards gaining market share. The market share of a single funeral home or cemetery in any community is primarily a function of the name and reputation of that funeral home or cemetery. Market share increases within a community are usually gained over a long period of time due to the high component of goodwill. Modest and tasteful promotional programs can help enhance community profile but typically do not increase market share significantly. The Company also faces significant competition in its acquisition program. In the United States funeral service industry acquisition market, the Company's competition includes Service Corporation International and Stewart Enterprises, Inc., both of which are publicly-traded companies with significant United States operations. Various smaller companies provide competition on a regional basis in the United States. The Company also experiences competition on a local level from operators who have focused on acquiring funeral home groupings in concentrated geographic regions of the United States. 31 REGULATION The funeral service industry is regulated primarily on a state and provincial basis with a vast majority of jurisdictions requiring licensing and supervision of individuals who provide funeral-related services. A number of jurisdictions also regulate the sale of pre-need services and the administration of any resulting trust funds or insurance contracts. In addition, concerns regarding lack of competition have led a few jurisdictions to enact legislation designed to encourage competition by restricting the common ownership of funeral homes and related operations within a specific geographic region. The Company's United States operations must also comply with federal legislation, including the laws administered by the Occupational Safety and Health Administration, the Americans with Disabilities Act and the Federal Trade Commission ("FTC") regulations. The FTC administers the Trade Regulation Rule on Funeral Industry Practices, the purpose of which is to prevent unfair or deceptive acts or practices in connection with the provision of funeral goods or services. ENVIRONMENT Management believes that the Company's primary environmental risk arises upon the acquisition of a funeral home or cemetery. The Company manages this risk by conducting extensive environmental due diligence of all potential acquisition candidates. Management endeavors to ensure that any environmental issues which occur prior to acquisition of an operation are identified and addressed in advance of acquisition or are covered by an appropriate indemnity by the seller. Management does not believe that an environmental problem at any single location will have a material adverse effect on the Company's financial results. EMPLOYEES At ., 1996, the Company employed approximately . people with approximately . people employed at the Company's corporate offices. Management believes that its relationship with employees is good. Fewer than . of the Company's employees are members of collective bargaining units. All full-time and eligible part-time employees who have been employed by the Company for more than 90 days are entitled to five Common Shares as part of the Company's "Sharing The Vision" program. 32 LEGAL PROCEEDINGS Gulf National Settlement. In November 1995, a jury in the Circuit Court of the First Judicial District of Hinds County, Mississippi, awarded Gulf National $100 million in compensatory damages and $400 million in punitive damages in a lawsuit against the Company Defendants in which Gulf National claimed breach of contract and related torts in connection with its allegations that the Company failed to consummate certain business transactions. The Company Defendants appealed the Gulf National award. On January 24, 1996, the Mississippi Supreme Court ruled that in order to stay execution of the Gulf National award pending the appeal thereof, the Company Defendants would be required to post a supersedeas bond with the Circuit Court in an amount equal to 125% of the judgment, or $625 million. On February 1, 1996, the Company Defendants and Gulf National executed a settlement agreement pursuant to which, among other things, the parties agreed a full mutual release of all claims against each other, and the Company Defendants agreed to deliver to Gulf National or its designees $50 million in cash, 1.5 million Common Shares and a promissory note in the amount of $80 million payable over 20 years in equal annual installments of $4 million, without interest. In connection with the issuance of the Gulf National Settlement Shares, on February 9, 1996, Loewen, LGII, Gulf National and various individuals and law firms that represented Gulf National (collectively the "Shareholders") entered into an agreement with respect to the Gulf National Settlement Shares (the "Shareholders' Agreement"), pursuant to which, among other things, Loewen agreed to file by September 1, 1996 a registration statement relating to the Gulf National Settlement Shares with the Commission and to have such registration statement declared effective by December 31, 1996. LGII also has agreed to pay to each Shareholder, upon due notice ("Notice") a per share price guarantee amount in certain circumstances. The per share price guarantee amount is equal to the amount, if any, by which $30 exceeds the weighted average trading price of the Common Shares for the five consecutive trading days preceding the date of Notice. LGII may elect to pay the aggregate price guarantee in Common Shares or cash. Notice may be delivered, and LGII is required to pay the price guarantee, only with respect to a 30-day period commencing February 14, 1997 (the "Determination Period"). LGII is relieved of its obligation to make such payment if during the Determination Period the trading price of the Common Shares exceeds $30 for any five consecutive trading days, provided that the registration statement has become effective before the Determination Period or the Shareholders have otherwise had an opportunity to sell their Gulf National Settlement Shares during the Determination Period. The Shareholders have granted to Loewen or its assignee a right of first refusal with respect to the Gulf National Settlement Shares and have agreed, until February 9, 1998, to vote the Gulf National Settlement Shares in accordance with the recommendations of the Board of Directors of Loewen. The right of first refusal does not apply in respect of any offers and sales at prices of $30 or more per Common Share during the Determination Period. Provident Settlement. In April 1992, Provident filed a lawsuit against Loewen and LGII in the United States District Court for the Eastern District of Pennsylvania alleging breach of contract and related tort claims arising out of terminated negotiations concerning a possible pre-need funeral insurance marketing arrangement. The complaint requested compensatory damages in excess of $58.8 million and unspecified punitive damages, based on allegations that the loss of the Company's pre-need business had deprived the plaintiffs of aggregate future profits of approximately $58.8 million to $132 million. On February 12, 1996, Provident, Loewen and LGII agreed to settle the litigation. On March 19, 1996, the parties entered into a settlement providing for a full mutual release from all claims against each other, and Loewen and LGII delivered one million Common Shares and $3 million in cash to Provident and certain designees. Loewen agreed to file a registration statement relating to the Provident Settlement Shares with the Commission by June 30, 1996. LGII agreed to pay to Provident for each Provident Settlement Share, in cash or Common Shares, at LGII's election, the amount, if any, by which $27 exceeds the weighted average trading price of the Common Shares during the five consecutive trading days ending on the day before the registration statement is declared effective. Class Actions. On November 4, 1995, a class action lawsuit claiming violations of Federal securities laws was filed on behalf of a class of purchasers of Company securities against Loewen and five officers (four of 33 whom are directors) in the United States District Court for the Eastern District of Pennsylvania. LGII, LGCLP and the lead underwriters of the MIPS offering were subsequently added as defendants. On June 11, 1996 all claims against such underwriters were dismissed without prejudice, by agreement of the parties. On November 7, 1995, a class action lawsuit was filed on behalf of a class of purchasers of Common Shares against Loewen and the same individual defendants in the United States District Court for the Southern District of Mississippi alleging Federal securities law violations and related common law claims. On December 1, 1995, a class action lawsuit was filed on behalf of a class of purchasers of the Company's securities against Loewen, LGII, LGCLP and the same individual defendants in the United States District Court for the Eastern District of Pennsylvania. The Class Actions allege that the defendants failed to disclose the Company's anticipated liability in connection with the Gulf National litigation and the Pennsylvania Class Actions allege failure to disclose the potential liability in connection with the Provident litigation. In each of the foregoing claims, the plaintiffs seek compensatory money damages in an unspecified amount, together with attorneys fees, expert fees and other costs and disbursements; and in addition, the November 7 action seeks unspecified punitive damages. The longest class period specified is from April 16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15, 1996 by the Judicial Panel on Multidistrict Litigation, the Mississippi Class Action was transferred to the Eastern District of Pennsylvania for consolidation of pretrial proceedings with the two Pennsylvania Class Actions. The plaintiffs are expected to file a consolidated amended complaint on or before August 9, 1996. LGII and Loewen expect that the claims in the consolidated complaint will not differ substantially from the claims in each of the Class Actions. The Company referred the claims to its insurance carrier under its directors and officers insurance policy. On February 9, 1996, the carrier denied coverage of the claim. The Company believes that such denial was improper. On March 21, 1996, the Company commenced an action in British Columbia Supreme Court seeking a declaration that the policy covers indemnification with respect to the Class Actions. The Company cannot predict at this time the extent to which any settlement or litigation that may result from these claims will ultimately be covered by insurance, if at all. The Company has determined that it is not possible at this time to predict the final outcome of these legal proceedings and that it is not possible to establish a reasonable estimate of possible damages, if any, or reasonably to estimate the range of possible damages that may be awarded to the plaintiffs. Accordingly, no provision has been made in the Company's 1995 Consolidated Financial Statements. Roe et al., Palladino et al. and O'Sullivan. In October 1995, Roe and 22 other families filed a lawsuit against LGII and Osiris in Florida Circuit Court in St. Petersburg. The complaint, as amended, now includes a total of 62 families. Plaintiffs allege that in July 1992, employees of the Royal Palm Cemetery facility who were installing a sprinkler line disturbed the remains of infants in one section of the cemetery. Each plaintiff in Roe is seeking damages in excess of $15,000, but counsel for the plaintiffs in Roe has publicly stated that the claims will aggregate to $1 million per family ($62 million based on the current plaintiffs). In early April 1996, a related lawsuit, Palladino et al., was filed by eight families against LGII and Osiris in Florida Circuit Court in St. Petersburg, and was assigned to the same judge handling the Roe matter, and in early May 1996, Sean M. O'Sullivan filed a lawsuit against Osiris and LGII. The factual allegations underlying the O'Sullivan complaint and the Palladino complaint, which was filed as a class action lawsuit, are identical to those in Roe. The Company is in the process of determining whether to agree to or oppose the certification of a class in Palladino. At the time the remains allegedly were disturbed, the Royal Palm Cemetery was owned by Osiris. Osiris was acquired by the Company in March 1995. The insurance carrier for Osiris has assumed the defense of these claims, subject to a reservation of rights. The policy limit is $11 million. No provision with respect to this lawsuit has been made in the Company's 1995 Consolidated Financial Statements. Rojas et al. On February 22, 1995, Juan Riveras Rojas, Leyda Rivera Vega, the Conjugal Partnership constituted between them, and Carlos Rivera Bustamente instituted a legal action against Loewen, LGII and a subsidiary in the United States District Court for the District of Puerto Rico. The complaint alleges that the defendants breached a contract and ancillary agreements with the plaintiffs relating to the purchase of funeral homes and cemeteries, and committed related torts. The plaintiffs seek compensatory damages of $12.5 million, 34 and unspecified punitive damages (although the Company is advised by counsel that there is no entitlement to punitive damages under Puerto Rican law). The Company has filed a motion to dismiss the complaint on the grounds of failure to join an indispensable party. In addition, the Company claims it has suffered damages far in excess of the amount claimed by the plaintiffs as a result of breach of contract and related torts on the part of the plaintiffs. A subsidiary of Loewen has filed a complaint seeking damages in excess of $19 million from the plaintiffs in the General Court of Justice of the Commonwealth of Puerto Rico. The Company has determined that it is not possible at this time to predict the final outcome of these legal proceedings and that it is not possible to establish a reasonable estimate of possible damages, if any, or reasonably to estimate the range of possible damages that may be awarded to the plaintiffs. Accordingly, no provision has been made in the Company's 1995 Consolidated Financial Statements. Esner Estate. As described in the Company's previous periodic reports, on February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as co- executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an action in the Court of Common Pleas in Bucks County, Pennsylvania against Osiris and a law firm that previously represented Osiris and its principal shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs. Miller and Shane currently are executive officers of Loewen and LGII. The complaint alleged that Osiris breached the terms of a Second Amended and Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the "Shareholders' Agreement") by attempting to repurchase shares of Osiris held by the Esner Estate (the "Esner Shares") without complying with the terms of the Shareholders' Agreement, and that the law firm breached its fiduciary duty and committed malpractice in connection with the drafting of the Shareholders' Agreement and its representation of Esner and Osiris. The Executors asked the Court (i) to have the value of Osiris reappraised pursuant to the terms of the Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner Shares pursuant to a new appraisal and the alleged terms of the Shareholders' Agreement or, alternatively, to pay the Esner Estate the fair value of the Esner Shares as determined by the new appraisal. On March 17, 1995, LGII purchased all of the issued and outstanding shares of Osiris, including the Esner Shares. In connection with the purchase, LGII entered into an indemnification agreement whereby Messrs. Miller and Shane agreed to indemnify and hold LGII harmless with respect to any claims, liabilities, losses and expenses, including reasonable attorneys' fees, in connection with or arising from the Esner Estate litigation. On April 9, 1996, the Executors filed a second complaint, which names Messrs. Miller and Shane and LGII as defendants. The second complaint alleges breach of contract, fraud and related claims against Messrs. Miller and Shane, and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors request compensatory damages of $24.3 million against the various defendants, and seek punitive damages from Messrs. Miller and Shane. A motion for consolidation of the two cases is pending. No provision with respect to these lawsuits has been made in the Company's 1995 Consolidated Financial Statements. Other. The Company is a party to other legal proceedings in the ordinary course of its business but does not expect the outcome of any of such other proceedings to have, individually or in the aggregate, a material adverse effect on the Company's financial position, results of operation or liquidity. 35 DESCRIPTION OF EXCHANGE NOTES The Exchange Notes will be issued in two separate series under an indenture dated as at March 20, 1996 (the "Indenture") between LGII, Loewen, as guarantor of the obligations of LGII under the Indenture, and Fleet National Bank, as trustee (the "Trustee"). The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture (a copy of which has been filed with the Commission as an exhibit to the Exchange Offer Registration Statement), including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of the Indenture. The definitions of certain capitalized terms used in the following summary are set forth below under "--Certain Definitions." GENERAL The Exchange Notes and the Guarantees, when issued, will be secured senior obligations of LGII and Loewen, respectively, and will rank pari passu in right of payment with all secured senior indebtedness of LGII and Loewen, respectively. The Exchange Notes include a Lien Limitation that limits Liens to certain categories of Liens described in the Indenture. The Collateral for the New Bank Facility includes a pledge for the benefit of the lenders under the New Bank Facility of the shares held by Loewen of substantially all of the subsidiaries in which Loewen directly or indirectly holds more than a 50% voting or economic interest (other than LGII) and all of the financial assets of LGII (LGII does not have material assets other than financial assets). In order to satisfy the Lien Limitation, the Lien secured by the Collateral has to be shared equally and ratably with the holders of the Indebtedness evidenced by the Exchange Notes. The Lien secured by the Collateral also is shared equally and ratably with all other holders of Pari Passu Indebtedness. However, the holders of the Exchange Notes will not have an independent right to require the Lien secured by the Collateral to remain in place or to require any other security for the Exchange Notes. As at March 31, 1996, the aggregate amount of Pari Passu Indebtedness was $842 million, after giving effect to (i) net proceeds of approximately $19 million from the exercise of the underwriters' overallotment option with respect to the 1996 Equity Offering and (ii) the closing of the New Bank Facility and the application of $75 million borrowed thereunder to repay the Multi-Currency Revolver permanently. The Exchange Notes and Guarantees are effectively subordinated in right of payment to all existing and future liabilities, including trade payables, of LGII's and Loewen's subsidiaries, respectively. As at March 31, 1996, the aggregate amount of Indebtedness of LGII's subsidiaries (excluding intercompany Indebtedness) was approximately $ . million, and the aggregate amount of Indebtedness of Loewen's subsidiaries other than LGII and its subsidiaries (excluding intercompany Indebtedness) was approximately $ . million. MATURITY, INTEREST AND PRINCIPAL The Series 3 Exchange Notes will mature on April 15, 2001, and the Series 4 Exchange Notes will mature on April 15, 2003. Interest on the Series 3 Exchange Notes will accrue at the rate of 7 1/2% per annum, and interest on the Series 4 Exchange Notes will accrue at the rate of 8 1/4% per annum. Interest will be payable semi-annually on each April 15 and October 15, commencing October 15, 1996, to the holders of record of Exchange Notes at the close of business on the April 1 and October 1 immediately preceding such interest payment date. Interest on the Exchange Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the original date of issuance (the "Issue Date"). Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Exchange Notes are not entitled to the benefit of any mandatory sinking fund. REDEMPTION AND OFFER TO PURCHASE Optional Redemption. The Series 3 Exchange Notes will not be redeemable prior to maturity. The Series 4 Exchange Notes will be redeemable at the option of LGII, in whole or in part, at any time on or after April 15, 2000, on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as 36 percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning April 15 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2000.............................................................. 104.125% 2001.............................................................. 102.063% 2002.............................................................. 100.000%
If less than all of the Series 4 Exchange Notes are to be redeemed, the particular Notes or portions thereof to be redeemed shall be selected for redemption either (a) pro rata, by lot or by such other method as the Trustee considers to be fair and appropriate or (b) in such manner as complies with the requirements of the principal national securities exchange, if any, on which the Series 4 Exchange Notes are listed. The amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof. Offer to Repurchase in Certain Circumstances. LGII is obligated to make, and the Guarantor will ensure that LGII makes (a) upon the occurrence of a Change of Control, an offer to repurchase all outstanding Exchange Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, and (b) upon the occurrence of certain sales or dispositions of assets (an "Asset Sale"), an offer to repurchase Exchange Notes with a portion of the net cash proceeds thereof, at a purchase price of 100% of the principal amount of the Exchange Notes, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control or an Asset Sale, there can be no assurance that LGII or the Guarantor will have, or will be able to obtain, sufficient funds to purchase all of the Exchange Notes or to pay the purchase price for all or any portion of Exchange Notes that LGII or the Guarantor might be required to purchase. See "--Certain Covenants; Change of Control" and "--Certain Covenants; Disposition of Proceeds of Asset Sales." Compliance with Securities Laws and Regulations. In the event of the redemption of or an offer to repurchase Exchange Notes, LGII and the Guarantor will comply with Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations thereunder. CERTAIN COVENANTS LGII and the Guarantor will jointly and severally make the following covenants, among others, in the Indenture. Limitation on Indebtedness. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) to, directly or indirectly, create, incur, issue, assume, guarantee or in any manner become directly or indirectly liable, contingently or otherwise, for the payment of (collectively, to "incur") any Indebtedness (including, without limitation, any Acquired Indebtedness) other than Permitted Indebtedness. Notwithstanding the foregoing limitations, the Guarantor and LGII (and any Wholly-Owned Subsidiary with respect to Seller Financing Indebtedness) will be permitted to incur Indebtedness (including, without limitation, Acquired Indebtedness) if at the time of such incurrence, and after giving pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Guarantor is at least equal to 2.25:1. Limitation on Restricted Payments. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) to, directly or indirectly: (a) declare or pay any dividend or make any other distribution or payment on or in respect of Capital Stock of the Guarantor or any of its Restricted Subsidiaries or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Guarantor or any of its Restricted Subsidiaries (other than (x) dividends or distributions payable solely in Capital Stock of the Guarantor (other than Redeemable Capital Stock) or in options, warrants or other rights to purchase Capital Stock of the Guarantor (other than Redeemable Capital Stock) and (y) dividends or other distributions to the extent declared or paid to the Guarantor or any Wholly-Owned Subsidiary of the Guarantor), 37 (b) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock of the Guarantor or any of its Restricted Subsidiaries (other than any such Capital Stock of a Wholly-Owned Subsidiary of the Guarantor), (c) make any principal payment on, or purchase, defease, repurchase, redeem or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other Stated Maturity, any Indebtedness that is subordinate or junior in right of payment to the Senior Notes or Pari Passu Indebtedness (other than any such subordinated or Pari Passu Indebtedness owned by the Guarantor or a Wholly- Owned Subsidiary of the Guarantor) or (d) make any Investment (other than any Permitted Investment) in any person, (such payments or Investments described in the preceding clauses (a), (b), (c) and (d) are collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, shall be the Fair Market Value on the date of such Restricted Payment of the asset(s) proposed to be transferred by the Guarantor or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment), (A) no Default or Event of Default shall have occurred and be continuing, (B) immediately prior to and after giving effect to such Restricted Payment, the Guarantor would be able to incur $1.00 of additional Indebtedness pursuant to the covenant described under "-- Limitation on Indebtedness" above (assuming a market rate of interest with respect to such additional Indebtedness) and (C) the aggregate amount of all Restricted Payments declared or made from and after the Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the Guarantor accrued on a cumulative basis during the period beginning on the first day of the fiscal quarter of the Guarantor during which the Issue Date occurs and ending on the last day of the fiscal quarter of the Guarantor immediately preceding the date of such proposed Restricted Payment, which period shall be treated as a single accounting period (or, if such aggregate cumulative Consolidated Net Income of the Guarantor for such period shall be a deficit, minus 100% of such deficit) plus (2) the aggregate net cash proceeds received by the Guarantor or LGII (without duplication) either (x) as capital contributions to the Guarantor or LGII (without duplication) after the Issue Date from any person (other than the Guarantor, LGII or a Restricted Subsidiary of the Guarantor or LGII, as the case may be) or (y) from the issuance or sale of Capital Stock (excluding Redeemable Capital Stock, but including Capital Stock issued upon the conversion of convertible Indebtedness or from the exercise of options, warrants or rights to purchase Capital Stock (other than Redeemable Capital Stock)) of the Guarantor or LGII (without duplication) to any person (other than to the Guarantor, LGII or a Restricted Subsidiary of the Guarantor or LGII, as the case may be) after the Issue Date plus (3) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date (excluding any Investment described in clause (v) of the following paragraph), an amount equal to the lesser of the return of capital with respect to such Investment and the cost of such Investment less, in either case, the cost of the disposition of such Investment plus (4) the sum of $15,000,000. For purposes of the preceding clause (C)(2), the value of the aggregate net proceeds received by the Guarantor or LGII (without duplication) upon the issuance of Capital Stock upon the conversion of convertible Indebtedness or upon the exercise of options, warrants or rights will be the net cash proceeds received upon the issuance of such Indebtedness, options, warrants or rights plus the incremental cash amount received by the Guarantor or LGII (without duplication) upon the conversion or exercise thereof. None of the foregoing provisions will prohibit (i) the payment of any dividend within 60 days after the date of its declaration, if at the date of declaration such payment would be permitted by the foregoing paragraph; (ii) so long as no Default or Event of Default shall have occurred and be continuing, the redemption, repurchase or other acquisition or retirement of any shares of any class of Capital Stock of the Guarantor, LGII or any Restricted Subsidiary of the Guarantor or LGII in exchange for, or out of the net cash proceeds of, a substantially concurrent (x) capital contribution to the Guarantor or LGII from any person (other than a Related Obligor, as described in the last sentence of this paragraph) or (y) issue and sale of other shares of Capital Stock (other than Redeemable Capital Stock) of the Guarantor or LGII to any person (other than to a Related Obligor); (iii) so long as no Default or Event of Default shall have occurred and be continuing, any redemption, repurchase or other acquisition or retirement of Indebtedness that is subordinate or junior in right of payment to the Senior Notes and the Guarantee by exchange for, or out of the net cash proceeds of, a substantially concurrent (x) capital 38 contribution to the Guarantor or LGII from any person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock (other than Redeemable Capital Stock) of the Guarantor or LGII to any person (other than a Related Obligor); provided, however, that the amount of any such net proceeds that are utilized for any such redemption, repurchase or other acquisition or retirement shall be excluded from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of the Guarantor or LGII issued to any person (other than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate or junior in right of payment to the Senior Notes and the Guarantee in the same manner and at least to the same extent as the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv) so long as no Default or Event of Default shall have occurred and be continuing, any redemption, repurchase or other acquisition or retirement of Pari Passu Indebtedness by exchange for, or out of the net cash proceeds of, a substantially concurrent (x) capital contribution to the Guarantor or LGII from any person (other than a Related Obligor) or (y) issue and sale of (1) Capital Stock (other than Redeemable Capital Stock) of the Guarantor or LGII to any person (other than a Related Obligor); provided, however, that the amount of any such net proceeds that are utilized for any such redemption, repurchase or other acquisition or retirement shall be excluded from clause (C)(2) of the preceding paragraph; or (2) Indebtedness of the Guarantor or LGII issued to any person (other than a Related Obligor), so long as such Indebtedness is Pari Passu Indebtedness or Indebtedness that is subordinate or junior in right of payment to the Senior Notes and the Guarantee in the same manner and at least to the same extent as the Indebtedness so purchased, exchanged, redeemed, acquired or retired; (v) Investments constituting Restricted Payments made as a result of the receipt of consideration that consists of cash or Cash Equivalents from any Asset Sale made pursuant to and in compliance with the covenant described under "--Disposition of Proceeds of Asset Sales" below; (vi) so long as no Default or Event of Default has occurred and is continuing, repurchases by the Guarantor of Common Stock of the Guarantor from employees of the Guarantor or their authorized representatives upon the death, disability or termination of employment of such employees, in an aggregate amount not exceeding $10,000,000 in any calendar year; (vii) Investments constituting Restricted Payments that are permitted by subparagraphs (iv) and (v) of the proviso to the section entitled "Limitation on Transactions with Interested Persons;" and (viii) the declaration or the payment of dividends on, or the scheduled purchase or redemption of, the Preferred Securities of a Special Finance Subsidiary or the Series C Preferred Shares of the Guarantor. In computing the amount of Restricted Payments previously made for purposes of clause (C) of the preceding paragraph, Restricted Payments made under the preceding clauses (v), (vi) and (vii) shall be included and those under clauses (i), (ii), (iii), (iv) and (viii) shall not be so included. For purposes of this covenant only, the term "Related Obligor" shall mean the Guarantor, LGII or a Restricted Subsidiary of the Guarantor or LGII. Limitation on Liens. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including without limitation LGII) to, create, incur, assume or suffer to exist any Liens of any kind against or upon any of its property or assets, or any proceeds therefrom where the aggregate amount of Indebtedness secured by any such Liens, together with the aggregate amount of property subject to any Sale-Leaseback Transactions of the Guarantor and its Restricted Subsidiaries (other than Permitted Sale-Leaseback Transactions), exceeds 10% of the Guarantor's Consolidated Net Worth unless (x) in the case of Liens securing Indebtedness that is subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (y) in all other cases, the Senior Notes are equally and ratably secured except for (a) Liens existing as at the Issue Date; (b) Liens securing the Securities or the outstanding Notes; (c) Liens in favor of the Guarantor, LGII or any Wholly- Owned Subsidiary; (d) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens do not extend to or cover any property or assets of the Guarantor or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (e) Permitted Liens. Change of Control. Upon the occurrence of a Change of Control, LGII will be, and the Guarantor will ensure that LGII will be, obligated to make an offer to purchase (a "Change of Control Offer"), and shall purchase, on a Business Day (the "Change of Control Purchase Date") not more than 60 nor less than 30 days following the occurrence of the Change of Control, all of the then outstanding Senior Notes properly tendered and not withdrawn at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal 39 amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Change of Control Offer is required to remain open for at least 20 Business Days and until the close of business on the Change of Control Purchase Date. If a Change of Control occurs and LGII fails to pay the Purchase Price for all Senior Notes properly tendered and not withdrawn, the Guarantor will be obligated to purchase all such Senior Notes at the Change of Control Purchase Price on the Change of Control Purchase Date. In order to effect such Change of Control Offer, LGII or the Guarantor, as the case may be, shall, not later than the 30th day after the occurrence of the Change of Control, mail to each holder of Senior Notes notice of the Change of Control Offer, which notice shall govern the terms of the Change of Control Offer and shall state, among other things, the procedures that holders of Senior Notes must follow to accept the Change of Control Offer. If a Change of Control were to occur, there can be no assurance that LGII or the Guarantor would have sufficient funds to pay the purchase price for all Senior Notes that LGII or the Guarantor might be required to purchase. In the event that LGII or the Guarantor were required to purchase Senior Notes pursuant to a Change of Control Offer, each of LGII and the Guarantor expect that they would need to seek third-party financing to the extent they may not have available funds to meet their purchase obligations. However, there can be no assurance that LGII or the Guarantor would be able to obtain such financing on favorable terms, if at all. Neither LGII nor the Guarantor shall be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements applicable to a Change of Control Offer made by LGII and purchases all Senior Notes validly tendered and not withdrawn under such Change of Control Offer. In the event that a Change of Control occurs and LGII or the Guarantor is required to purchase Exchange Notes as described above, LGII and the Guarantor will comply with Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations thereunder. With respect to the sale of assets referred to in the definition of Change of Control, the phrase "all or substantially all" as used in such definition varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under relevant law and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantially all" of the assets of a person and, therefore, it may be unclear whether a Change of Control has occurred and whether the Senior Notes are subject to a Change of Control Offer. Disposition of Proceeds of Asset Sales. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) (or First Capital Life Insurance Company of Louisiana, National Capital Life Insurance Company or a Subsidiary holding the insurance company assets obtained from S.I. Acquisition Associates, L.P.) to, make any Asset Sale unless (a) the Guarantor or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares or assets sold or otherwise disposed of and (b) at least 75% of such consideration consists of cash or Cash Equivalents. To the extent the Net Cash Proceeds of any Asset Sale are not required to be applied to repay, and permanently reduce the commitments under, the Credit Agreements (as required by the terms thereof) or any other Pari Passu Indebtedness, or are not so applied, the Guarantor or such Restricted Subsidiary, as the case may be, may, within 180 days of such Asset Sale, apply such Net Cash Proceeds to an investment in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in the business of the Guarantor and its Restricted Subsidiaries existing on the Issue Date or in businesses reasonably related thereto ("Replacement Assets"). Any Net Cash Proceeds from any Asset Sale that are neither used to repay, and permanently reduce the commitments under, the Credit Agreements nor invested in Replacement Assets within the 180-day period described above constitute "Excess Proceeds" subject to disposition as provided below. 40 When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000, the Guarantor shall cause LGII to make an offer to purchase (an "Asset Sale Offer"), from all holders of the Senior Notes, not more than 40 Business Days thereafter, an aggregate principal amount of Senior Notes equal to such Excess Proceeds, at a price in cash equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the purchase date. To the extent that the aggregate principal amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, LGII may use such deficiency for general corporate purposes. If the aggregate principal amount of Senior Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Senior Notes to be purchased will be selected on a pro rata basis. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero. In the event that an Asset Sale occurs and LGII or the Guarantor is required to purchase Exchange Notes as described above, LGII and the Guarantor will comply with Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations thereunder. Limitation on Issuances and Sale of Preferred Stock by Restricted Subsidiaries. The Guarantor (a) will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) to issue any Preferred Stock (other than (i) Preferred Stock issued to the Guarantor or a Wholly- Owned Subsidiary of the Guarantor and (ii) Preferred Securities of a Special Finance Subsidiary); and (b) will not permit any person to own any Preferred Stock of any Restricted Subsidiary of the Guarantor (other than (i) Preferred Stock owned by the Guarantor or a Wholly-Owned Subsidiary of the Guarantor and (ii) Preferred Securities of a Special Finance Subsidiary); provided, however, that this covenant shall not prohibit the issuance and sale of (x) all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary of the Guarantor owned by the Guarantor or any of its Restricted Subsidiaries in compliance with the other provisions of the Indenture or (y) directors' qualifying shares or investments by foreign nationals mandated by applicable law. Limitation on Transactions with Interested Persons. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, transfer, disposition, purchase, exchange or lease of assets, property or services) with, or for the benefit of, any Affiliate of the Guarantor or any beneficial owner (determined in accordance with the Indenture) of 5% or more of the Common Stock of the Guarantor at any time outstanding ("Interested Persons"), unless (a) such transaction or series of related transactions are on terms that are no less favorable to the Guarantor or such Restricted Subsidiary, as the case may be, than those which could have been obtained in a comparable transaction at such time from persons who are not Affiliates of the Guarantor or Interested Persons, (b) with respect to a transaction or series of transactions involving aggregate payments or value equal to or greater than $10,000,000, the Guarantor has obtained a written opinion from an Independent Financial Advisor stating that the terms of such transaction or series of transactions are fair to the Guarantor or its Restricted Subsidiary, as the case may be, from a financial point of view and (c) with respect to a transaction or series of transactions involving aggregate payments or value equal to or greater than $2,500,000, the Guarantor shall have delivered an officers' certificate to the Trustee certifying that such transaction or series of transactions comply with the preceding clause (a) and, if applicable, certifying that the opinion referred to in the preceding clause (b) has been delivered and that such transaction or series of transactions have been approved by a majority of the Board of Directors of the Guarantor (including a majority of the disinterested directors); provided, however, that this covenant will not restrict the Guarantor from (i) paying dividends in respect of its Capital Stock permitted under the covenant described under "--Limitation on Restricted Payments" above, (ii) paying reasonable and customary fees to directors of the Guarantor or any Restricted Subsidiary who are not employees of the Guarantor or any Restricted Subsidiary, (iii) entering into transactions with its Wholly-Owned Subsidiaries or permitting its Wholly-Owned Subsidiaries from entering into transactions with other Wholly-Owned Subsidiaries of the Guarantor, (iv) making loans or advances to senior officers and directors of the Guarantor or any Restricted Subsidiary not in excess of $6,000,000 in the aggregate at any one time outstanding, (v) guaranteeing loans made to officers and other employees of the Guarantor and its Restricted Subsidiaries in connection with the Guarantor's 1994 Management Equity Investment Plan not in excess of $6,000,000 in the aggregate at any one time outstanding, (vi) making loans or advances to officers, employees or consultants of the Guarantor and its Restricted Subsidiaries for travel and moving expenses in the 41 ordinary course of business for bona fide business purposes of the Guarantor and its Restricted Subsidiaries, (vii) making other loans or advances to officers, employees or consultants of the Guarantor and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes of the Guarantor and its Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any one time outstanding, (viii) making payments to officers or employees of the Guarantor or its Restricted Subsidiaries pursuant to obligations undertaken, at a time when such persons were not officers or employees of the Guarantor or its Restricted Subsidiaries, in connection with arms' length Asset Acquisitions or (ix) declaring or paying dividends on, or purchasing or redeeming, the Preferred Securities of a Special Finance Subsidiary. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including, without limitation, LGII) to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Guarantor to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness owed to the Guarantor or any other Restricted Subsidiary of the Guarantor, (c) make loans or advances to, or any Investment in, the Guarantor or any other Restricted Subsidiary of the Guarantor, (d) transfer any of its properties or assets to the Guarantor or any other Restricted Subsidiary of the Guarantor or (e) guarantee any Indebtedness of the Guarantor or any other Restricted Subsidiary of the Guarantor, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non- assignment provisions of any contract or any lease governing a leasehold interest of the Guarantor or any Restricted Subsidiary of the Guarantor, (iii) customary restrictions on transfers of property subject to a Lien permitted under the Indenture which could not materially adversely affect the Guarantor's ability to satisfy its obligations under the Indenture and the Senior Notes, (iv) any agreement or other instrument of a person acquired by the Guarantor or any Restricted Subsidiary of the Guarantor (or a Restricted Subsidiary of such person) in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person, or the properties or assets of the person, so acquired, (v) provisions contained in any agreement or instrument relating to Indebtedness which prohibit the transfer of all or substantially all of the assets of the obligor thereunder unless the transferee shall assume the obligations of the obligor under such agreement or instrument and (vi) encumbrances and restrictions under Indebtedness in effect on the Issue Date (including under the Senior Notes) and encumbrances and restrictions in permitted refinancings or replacements thereof which are no less favorable to the holders of the Senior Notes than those contained in the Indebtedness so refinanced or replaced. Limitation on Sale-Leaseback Transactions. The Guarantor will not, and will not permit any of its Restricted Subsidiaries (including without limitation LGII) to, enter into any Sale-Leaseback Transaction with respect to any property of the Guarantor or any of its Restricted Subsidiaries where the aggregate amount of property subject to such Sale-Leaseback Transactions, together with the aggregate amount of Liens securing Indebtedness of the Guarantor and its Restricted Subsidiaries (other than Permitted Liens), exceeds 10% of the Guarantor's Consolidated Net Worth. Notwithstanding the foregoing, the Guarantor and its Restricted Subsidiaries may enter into Sale- Leaseback Transactions ("Permitted Sale-Leaseback Transactions") with respect to property acquired or constructed after the Issue Date; provided that (a) the Attributable Value of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of the Guarantor or such Restricted Subsidiary, as the case may be, and (b) after giving pro forma effect to any such Sale-Leaseback Transaction and the foregoing clause (a), the Guarantor would be able to incur $1.00 of additional Indebtedness pursuant to the covenant described under "-- Limitation on Indebtedness" above (assuming a market rate of interest with respect to such additional Indebtedness). Limitation on Applicability of Certain Covenants. During any period of time that (i) the ratings assigned to the Notes by each of S&P and Moody's (collectively, the "Rating Agencies") are no less than BBB- and Baa3, respectively (the "Investment Grade Ratings"), and (ii) no Default or Event of Default has occurred and is continuing, the Guarantor and its Restricted Subsidiaries, including without limitation LGII, will not be subject 42 to the covenants entitled "Limitation on Indebtedness," "Limitation on Restricted Payments," "Disposition of Proceeds of Asset Sales," "Limitation on Issuances and Sale of Preferred Stock by Restricted Subsidiaries," "Limitations on Transactions with Interested Persons" and "Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries" (collectively, the "Suspended Covenants"). If one or both Rating Agencies withdraws its rating or downgrades its Investment Grade Rating, then thereafter the Guarantor and its Restricted Subsidiaries will be subject, on a prospective basis, to the Suspended Covenants (until the Rating Agencies have again assigned Investment Grade Ratings to the Senior Notes) and compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal or downgrade will be calculated in accordance with the covenant entitled "Limitation on Restricted Payments" as if such covenant had been in effect at all times after the date of the Indenture. Reporting Requirements. The Guarantor will file with the Commission, or if not permitted or required to so file will deliver to the Trustee, the annual reports, quarterly reports and other documents required to be filed with the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not the Guarantor has a class of securities registered under the Exchange Act. The Guarantor will be required to file with the Trustee and provide to each Holder within 15 days after it files them with the Commission (or if any such filing is not permitted under the Exchange Act, 15 days after the Guarantor would have been required to make such filing) copies of such reports and documents. Rule 144A Information Requirement. If at any time the Guarantor is no longer subject to the reporting requirements of the Exchange Act, it will furnish to the Holders or beneficial holders of the Senior Notes and prospective purchasers of the Senior Notes designated by the holders of the Senior Notes, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. MERGER, SALE OF ASSETS, ETC. The Guarantor will not, and will not permit LGII to, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any person or persons, and the Guarantor will not permit any of its Restricted Subsidiaries (including without limitation LGII) to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Guarantor or LGII or the Guarantor and its Restricted Subsidiaries, taken as a whole, or LGII and its Restricted Subsidiaries, taken as a whole, to any other person or persons, unless at the time of and after giving effect thereto (a) either (i) if the transaction or series of transactions is a merger or consolidation, the Guarantor or LGII or the Restricted Subsidiary, as the case may be, shall be the surviving person of such merger or consolidation, or (ii) the person formed by such consolidation or into which the Guarantor, LGII or such Restricted Subsidiary, as the case may be, is merged or to which the properties and assets of the Guarantor, LGII or such Restricted Subsidiary, as the case may be, are transferred (any such surviving person or transferee person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any state thereof, the District of Columbia, Canada or any province thereof and shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Guarantor or LGII, as the case may be, under the Senior Notes and the Indenture, and in each case, the Indenture shall remain in full force and effect; (b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing and the Guarantor, LGII or the Surviving Entity, as the case may be, after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), could incur $1.00 of additional Indebtedness pursuant to the covenant described under "--Certain Covenants; Limitation on Indebtedness" above (assuming a market rate of interest with respect to such additional Indebtedness); and (c) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, 43 any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), the Consolidated Net Worth of the Guarantor, LGII or the Surviving Entity, as the case may be, is at least equal to the Consolidated Net Worth of the Guarantor or LGII, as the case may be, immediately before such transaction or series of transactions. In connection with any consolidation, merger, transfer, lease, assignment or other disposition contemplated hereby, the Guarantor or LGII, as the case may be, shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, transfer, lease, assignment or other disposition and the supplemental indenture in respect thereof comply with the requirements under the Indenture; provided, however, that, solely for purposes of computing amounts described in subclause (C) of the covenant described under "--Certain Covenants; Limitation on Restricted Payments" above, any such successor person shall only be deemed to have succeeded to and be substituted for the Guarantor or LGII, as the case may be, with respect to periods subsequent to the effective time of such merger, consolidation or transfer of assets. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Guarantor or LGII in accordance with the foregoing, in which the Guarantor or LGII is not the continuing corporation, the successor corporation formed by such a consolidation or into which the Guarantor or LGII is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor or LGII, as the case may be, under the Indenture with the same effect as if such successor corporation had been named as the Guarantor or LGII therein. EVENTS OF DEFAULT The following will be "Events of Default" with respect to each series of Exchange Notes: (i) default in the payment of the principal of or premium, if any, on any Exchange Note of such series when the same becomes due and payable (upon Stated Maturity, acceleration, required purchase, scheduled principal payment or otherwise); or (ii) default in the payment of an installment of interest on any of the Exchange Notes of such series, when the same becomes due and payable, which default continues for a period of 30 days; or (iii) failure to perform or observe any other term, covenant or agreement contained in the Exchange Notes of such series or the Indenture or the Guarantee with respect to Exchange Notes of such series (other than a default specified in clause (i) or (ii) above) and such default continues for a period of 30 days after written notice of such default requiring the Guarantor and LGII to remedy the same shall have been given (x) to the Guarantor and LGII by the Trustee or (y) to the Guarantor, LGII and the Trustee by holders of 25% in aggregate principal amount of the Exchange Notes of such series then outstanding; or (iv) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness under which the Guarantor or any Restricted Subsidiary of the Guarantor (including without limitation LGII) then has outstanding Indebtedness in excess of $20,000,000 (including Senior Notes of another series), individually or in the aggregate, and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults have resulted in the acceleration of the maturity of such Indebtedness; or (v) one or more judgments, orders or decrees of any court or regulatory or administrative agency of competent jurisdiction for the payment of money in excess of $20,000,000, either individually or in the aggregate, shall be entered against the Guarantor or any Restricted Subsidiary of the Guarantor (including without limitation LGII) or any of their respective properties and shall not be discharged or bonded against or stayed and there shall have been a period of 60 days after the date on which any period for appeal has expired and during which a stay of enforcement of such judgment, order or decree shall not be in effect; or (vi) either (i) the collateral agent under the Credit Agreements or (ii) any holder of at least $20,000,000 in aggregate principal amount of Indebtedness of the Guarantor or any of its Restricted Subsidiaries (including without limitation LGII) shall commence judicial proceedings to foreclose upon assets of the 44 Guarantor or any of its Restricted Subsidiaries having an aggregate Fair Market Value, individually or in the aggregate, in excess of $20,000,000 or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure; or (vii) the Guarantee with respect to such series ceases to be in full force and effect or is declared null and void, or the Guarantor denies that it has any further liability under the Guarantee with respect to such series or gives notice to such effect (other than by reason of the termination of the Indenture or the release of the Guarantee with respect to such series in accordance with the Indenture) and such condition shall have continued for a period of 60 days after written notice of such failure (which notice shall specify the Default, demand that it be remedied and state that it is a "Notice of Default") requiring the Guarantor and LGII to remedy the same shall have been given (x) to the Guarantor and LGII by the Trustee or (y) to the Guarantor, LGII and the Trustee by holders of at least 25% in aggregate principal amount of the Senior Notes of any series then outstanding; or (viii) certain events of bankruptcy, insolvency or reorganization with respect to the Guarantor or any Significant Subsidiary of the Guarantor (including without limitation LGII) shall have occurred. If an Event of Default (other than as specified in clause (viii) above) shall occur and be continuing with respect to the Exchange Notes of any series, the Trustee, by notice to the Guarantor and LGII, or the holders of at least 25% in aggregate principal amount of the Exchange Notes of such series then outstanding, by notice to the Trustee, the Guarantor and LGII, may declare the principal of, premium, if any, and accrued and unpaid interest, if any, on all of the outstanding Exchange Notes of such series due and payable immediately, upon which declaration, all amounts payable in respect of the Exchange Notes of such series shall be immediately due and payable. If an Event of Default specified in clause (viii) above occurs and is continuing, then the principal of, premium, if any, and accrued and unpaid interest, if any, on all of the outstanding Exchange Notes of such series shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Exchange Notes. After a declaration of acceleration under the Indenture with respect to the Exchange Notes of any series, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Exchange Notes of such series, by written notice to the Guarantor, LGII and the Trustee, may rescind such declaration if (a) the Guarantor or LGII has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Exchange Notes of such series, (iii) the principal of and premium, if any, on any Exchange Notes of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Exchange Notes of such series, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the Exchange Notes of such series which has become due otherwise than by such declaration of acceleration; (b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (c) all Events of Default, other than the non-payment of principal of, premium, if any, and interest on the Exchange Notes of such series that have become due solely by such declaration of acceleration, have been cured or waived. Prior to the declaration of acceleration of the Exchange Notes of any series, the holders of not less than a majority in aggregate principal amount of the outstanding Exchange Notes of such series may on behalf of the holders of all the Exchange Notes of such series waive any past defaults under the Indenture, except a default in the payment of the principal of, premium, if any, or interest on any Exchange Note of such series, or in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each Exchange Note of such series outstanding. No holder of any of the Exchange Notes of any series has any right to institute any proceeding with respect to the Indenture or the Exchange Notes of such series or any remedy thereunder, unless the holders of at least 25% in aggregate principal amount of the outstanding Exchange Notes of such series have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Exchange Notes of such series and the Indenture, the Trustee has failed to institute such proceeding within 30 days after receipt of such notice and the Trustee, within such 30-day period, has not received directions inconsistent with 45 such written request by holders of a majority in aggregate principal amount of the outstanding Exchange Notes of such series. Such limitations do not apply, however, to a suit instituted by a holder of an Exchange Note of such series for the enforcement of the payment of the principal of, premium, if any, or interest on such Exchange Note on or after the respective due dates expressed in such Exchange Note. During the existence of an Event of Default, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, whether or not an Event of Default shall occur and be continuing, the Trustee under the Indenture is not under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders unless such holders shall have offered to the Trustee reasonable security or indemnity. Subject to certain provisions concerning the rights of the Trustee, the holders of not less than a majority in aggregate principal amount of the outstanding Exchange Notes of any series have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee under the Indenture with respect to the Exchange Notes of such series. If an Event of Default occurs and is continuing and is known to the Trustee, the Trustee shall mail to each holder of the Exchange Notes notice of the Event of Default within 30 days after obtaining knowledge thereof. Except in the case of an Event of Default in payment of principal of, premium, if any, or interest on any Exchange Notes, the Trustee may withhold the notice to the holders of such Exchange Notes if a committee of its trust officers in good faith determines that withholding the notice is in the interest of the holders of the Exchange Notes. LGII is required to furnish to the Trustee annual and quarterly statements as to the performance by LGII of its obligations under the Indenture and as to any default in such performance. LGII is also required to notify the Trustee within ten days of any event which is, or after notice or lapse of time or both would become, an Event of Default. DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE Each of the Guarantor and LGII may, at its option and at any time, terminate the obligations of the Guarantor and LGII with respect to the outstanding Exchange Notes of any series ("defeasance"). Such defeasance means that the Guarantor and LGII shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Exchange Notes of such series, except for (i) the rights of holders of outstanding Exchange Notes of such series to receive payment in respect of the principal of, premium, if any, and interest on such Exchange Notes when such payments are due, (ii) LGII's obligations to issue temporary Exchange Notes of such series, register the transfer or exchange of any Exchange Notes of such series, replace mutilated, destroyed, lost or stolen Exchange Notes of such series and maintain an office or agency for payments in respect of the Exchange Notes of such series, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance provisions of the Indenture. In addition, each of the Guarantor and LGII may, at its option and at any time, elect to terminate the obligations of the Guarantor and LGII with respect to certain covenants that are set forth in the Indenture, some of which are described under "--Certain Covenants" above (including the covenant described under "--Certain Covenants; Change of Control" above) and any subsequent failure to comply with such obligations shall not constitute a Default or Event of Default with respect to the Exchange Notes of such series ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance, (i) LGII must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Exchange Notes of such series, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Exchange Notes of such series to maturity (except lost, stolen or destroyed Exchange Notes of such series which have been replaced or paid); (ii) the Guarantor or LGII shall have delivered to the Trustee an opinion of counsel to the effect that the holders of the outstanding Exchange 46 Notes of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax laws); (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit; (iv) such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of LGII; (v) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Guarantor or LGII is a party or by which it is bound; (vi) the Guarantor or LGII shall have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (vii) the Guarantor or LGII shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Exchange Notes of any series when (i) either (a) all the Exchange Notes of such series theretofore authenticated and delivered (except lost, stolen or destroyed Exchange Notes of such series which have been replaced or repaid and Exchange Notes of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by LGII and thereafter repaid to LGII or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Exchange Notes of such series have otherwise become due and payable and the Guarantor or LGII has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Exchange Notes of such series not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Exchange Notes of such series to the date of deposit together with irrevocable instructions from the Guarantor or LGII directing the Trustee to apply such funds to the payment thereof at maturity; (ii) the Guarantor and LGII have paid all other sums payable under the Indenture by LGII; (iii) there exists no Default or Event of Default under the Indenture; and (iv) the Guarantor or LGII has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. AMENDMENTS AND WAIVERS The Indenture will provide that the Guarantor and LGII, when authorized by a Board Resolution, and the Trustee may amend, waive or supplement the Indenture or the Exchange Notes without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with the provisions described under "Merger, Sale of Assets, Etc." above; (c) to provide for uncertificated Exchange Notes in addition to certificated Exchange Notes; (d) to comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA; or (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder. Notwithstanding the foregoing, the Guarantor, the Trustee and LGII may not make any change that adversely affects the rights of any Holder under the Indenture. Other modifications and amendments of the Indenture may be made with the consent of the holders of not less than a majority in aggregate principal amount of each series of the then outstanding Exchange Notes, except that, without the consent of each holder of the Exchange Notes affected thereby, no amendment may, directly or indirectly: (i) reduce the amount of Exchange Notes whose holders must consent to any amendment; (ii) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Exchange Notes; (iii) change the currency in which the Notes are payable; (iv) reduce the principal of or change the fixed maturity of any Exchange Notes, or change the date on which any Notes may be subject to repurchase, or reduce the repurchase price therefor; (v) make any Exchange Notes payable in money other than that stated in the Senior Notes; (vi) make any change in provisions of the Indenture protecting the right of each holder of an Exchange Note to receive payment of principal of and interest on such Exchange Note on or after the date thereof or to bring suit to enforce such payment or permitting holders of a majority in principal amount 47 of the Exchange Notes of such series to waive Defaults or Events of Default; (vii) subordinate in right of payment, or otherwise subordinate, the Exchange Notes of such series to any other Indebtedness or obligation of the Guarantor or LGII; or (viii) amend, alter, change or modify the obligation of LGII to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate an Asset Sale Offer or waive any Default in the performance of any such offers or modify any of the provisions or definitions with respect to any such offers. REGISTRATION RIGHTS AGREEMENT In the event that (i) due to a change in current interpretations by the Commission, LGII determines that consummation of the Exchange Offer as contemplated by the Registration Rights Agreement would violate applicable law or applicable interpretations by the Commission, (ii) the Exchange Offer is not for any other reason consummated within 150 days after the date on which LGII delivered the Outstanding Notes to the Initial Purchasers (the "Closing Date") or (iii) any holder or holders of $5,000,000 aggregate principal amount of Outstanding Notes, within 30 days after consummation of the Exchange Offer, notify LGII that such holders (x) are prohibited by applicable law or Commission policy from participating in the Exchange Offer, (y) may not resell Exchange Notes acquired by them in the Exchange Offer to the public without delivering a prospectus and that the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such holders or (z) are broker-dealers and hold Outstanding Notes acquired directly from LGII or an "affiliate" of LGII or Loewen, within the meaning of Rule 405 under the Securities Act, it is contemplated that the Guarantor and LGII will file a registration statement (a "Shelf Registration Statement") covering resales (a) by all holders of Outstanding Notes in the event LGII determines that the consummation of the Exchange Offer would violate applicable law or interpretations by the Commission pursuant to the foregoing clause (i) or the Exchange Offer is not consummated within 150 days after the Closing Date pursuant to the foregoing clause (ii), or (b) by the Initial Purchasers after consummation of the Exchange Offer, if a Shelf Registration Statement is required solely pursuant to the foregoing clause (iii), and will use their best efforts to cause any such Shelf Registration Statement to become effective and to keep such Shelf Registration Statement effective for 180 days from the effective date thereof. The Guarantor and LGII shall, if they file a Shelf Registration Statement, provide to each holder of Outstanding Notes copies of the prospectus and notify each such holder when the Shelf Registration Statement has become effective. A holder that sells Outstanding Notes pursuant to a Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a current prospectus to purchasers, and will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales. Under the Registration Rights Agreement, the Guarantor and LGII agreed to use their best efforts to: (i) file the Exchange Offer Registration Statement or a Shelf Registration Statement with the Commission within 45 days after the Closing Date, (ii) have such Exchange Offer Registration Statement or Shelf Registration Statement declared effective by the Commission, and (iii) commence the Exchange Offer and issue the Exchange Notes in exchange for all Outstanding Notes validly tendered in accordance with the terms of the Exchange Offer prior to the close of the Exchange Offer, or, in the alternative, cause such Shelf Registration Statement to remain effective for 180 days from the effective date thereof. Although the Guarantor and LGII intend to file a Shelf Registration Statement, if applicable, as described above, there can be no assurance that a Shelf Registration Statement will be filed or, if filed, that it will become effective. Each holder of Notes, by virtue of being or becoming so, is bound by the provisions of the Registration Rights Agreement that may require the holder to furnish notice or other information to the Guarantor and LGII as a condition to certain obligations of the Guarantor and LGII to file a Shelf Registration Statement by a particular date or to maintain its effectiveness for the prescribed 180-day period. If the Guarantor and LGII fail to comply with the above provisions, additional interest ("Penalty Interest") shall be assessed on the Notes as follows: (i) (A) if the Exchange Offer Registration Statement or, in the event that due to a change in current interpretations by the Commission the Guarantor and LGII are not permitted to effect the Exchange Offer, a Shelf Registration Statement is not filed within 45 days following the Closing Date or (B) in the event that within 30 days after the consummation of the Exchange Offer (the "prescribed time period"), any holder 48 or holders of $5,000,000 aggregate principal amount of Outstanding Notes shall notify LGII that such holders (x) are prohibited by applicable law or Commission policy from participating in the Exchange Offer, (y) may not resell Exchange Notes acquired by them in the Exchange Offer to the public without delivering a prospectus and that the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such holders or (z) are broker-dealers and hold Outstanding Notes acquired directly from LGII or an "affiliate" of LGII or Loewen, within the meaning of Rule 405 under the Securities Act, if a Shelf Registration Statement is not filed within 45 days after expiration of the prescribed time period, then commencing on the 46th day after either the Closing Date or the expiration of the prescribed time period, as the case may be, Penalty Interest shall be accrued on the Notes over and above the accrued interest at a rate of .50% per annum for the first 90 days immediately following the 46th day after either the Closing Date or the expiration of the prescribed time period, as the case may be, such Penalty Interest rate increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; (ii) if the Exchange Offer Registration Statement or a Shelf Registration Statement is filed pursuant to clause (i) of the preceding paragraph and is not declared effective within 120 days following either the Closing Date or the expiration of the prescribed time period, as the case may be, then commencing on the 121st day after either the Closing Date or the expiration of the prescribed time period, as the case may be, Penalty Interest shall be accrued on the Outstanding Notes over and above the accrued interest at a rate of .50% per annum for the first 90 days immediately following the 121st day after either the Closing Date or the expiration of the prescribed time period, as the case may be, such Penalty Interest rate increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; and (iii) if either (A) the Guarantor and LGII have not exchanged Exchange Notes for all Outstanding Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to 30 days after the date on which the Exchange Offer Registration Statement was declared effective, or (B) if applicable, a Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective prior to 180 days from its original effective date, then, subject to certain exceptions, Penalty Interest shall be accrued on the Outstanding Notes over and above the accrued interest at a rate of .50% per annum for the first 60 days immediately following the (x) 31st day after such effective date, in the case of (A) above, or (y) the day such Shelf Registration Statement ceases to be effective in the case of (B) above, such Penalty Interest rate increasing by an additional .25% per annum at the beginning of each subsequent 60-day period; provided, however, that the Penalty Interest rate on the Outstanding Notes may not exceed 1.5% per annum; and provided further that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of (i) above), (2) upon the effectiveness of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of (ii) above), or (3) upon the exchange of Exchange Notes for all Outstanding Notes validly tendered in the Exchange Offer or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective prior to 180 days from its original effective date (in the case of (iii) above), Penalty Interest on the Outstanding Notes as a result of such clause (i), (ii) or (iii) shall cease to accrue. Any amounts of Penalty Interest due pursuant to clause (i), (ii) or (iii) above will be payable in cash on the interest payment dates of the Outstanding Notes. The amount of Penalty Interest will be determined by multiplying the applicable Penalty Interest rate by the principal amount of the Outstanding Notes, multiplied by a fraction, the numerator of which is the number of days such Penalty Interest rate was applicable during such period (determined on the basis of a 360-day year composed of twelve 30-day months), and the denominator of which is 360. The foregoing summary of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Registration Rights Agreement. A copy of the Registration Rights Agreement has been filed with the Commission as an exhibit to the Exchange Offer Registration Statement. 49 THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee thereunder will perform only such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Indenture and provisions of the TIA incorporated by reference therein contain limitations on the rights of the Trustee thereunder, should it become a creditor of the Guarantor or LGII, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict or resign. GOVERNING LAW The Indenture and the Exchange Notes will be governed by the laws of the State of New York, without regard to the principles of conflicts of law. CONSENT TO SERVICE AND JURISDICTION Each of LGII and Loewen has appointed Thelen, Marrin, Johnson & Bridges, 330 Madison Avenue, New York, New York 10017, Attention: David P. Graybeal, Esq., as its authorized agent upon whom process may be served in any suit, action or proceeding arising out of or based on the Indenture which may be instituted in any federal or state court located in The City of New York, expressly consents to the jurisdiction of any such court in respect of any such suit, action or proceeding, and waives other requirements of or objections to personal jurisdiction with respect thereto. CERTAIN DEFINITIONS "Acquired Indebtedness" means Indebtedness of a person (a) assumed or created in connection with an Asset Acquisition from such person or (b) existing at the time such person becomes a Restricted Subsidiary of any other person. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. "Asset Acquisition" means (a) an Investment by the Guarantor or any Restricted Subsidiary of the Guarantor (including without limitation LGII) in any other person pursuant to which such person shall become a Restricted Subsidiary of the Guarantor, or shall be merged with or into the Guarantor or any Restricted Subsidiary of the Guarantor, (b) the acquisition by the Guarantor or any Restricted Subsidiary of the Guarantor of the assets of any person (other than a Restricted Subsidiary of the Guarantor) which constitute all or substantially all of the assets of such person or (c) the acquisition by the Guarantor or any Restricted Subsidiary of the Guarantor of any division or line of business of any person (other than a Restricted Subsidiary of the Guarantor). "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease or other disposition to any person other than the Guarantor or a Restricted Subsidiary of the Guarantor (including without limitation LGII), in one or a series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary of the Guarantor (other than in respect of director's qualifying shares or investments by foreign nationals mandated by applicable law) or of First Capital Life Insurance Company of Louisiana, National Capital Life Insurance Company or a Subsidiary holding the insurance company assets acquired from S.I. Acquisition Associates, L.P.; (b) all or substantially all of the properties and assets of any division or line of business of the Guarantor or any Restricted Subsidiary of the Guarantor; or (c) any other properties or assets of the Guarantor or any Restricted Subsidiary of the Guarantor other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include (i) any sale, transfer or other disposition of equipment, tools or other assets 50 (including Capital Stock of any Restricted Subsidiary of the Guarantor) by the Guarantor or any of its Restricted Subsidiaries in one or a series of related transactions in respect of which the Guarantor or such Restricted Subsidiary receives cash or property with an aggregate Fair Market Value of $2,000,000 or less; and (ii) any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets that is governed by the provisions described under "--Merger, Sale of Assets, Etc." above. "Attributable Value" means, as to any particular lease under which any person is at the time liable other than a Capitalized Lease Obligation, and at any date as at which the amount thereof is to be determined, the total net amount of rent required to be paid by such person under such lease during the initial term thereof as determined in accordance with GAAP, discounted from the last date of such initial term to the date of determination at a rate per annum equal to the discount rate which would be applicable to a Capitalized Lease Obligation with a like term in accordance with GAAP. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of insurance, taxes, assessments, utility, operating and labor costs and similar charges. In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Attributable Value" means, as to a Capitalized Lease Obligation under which any person is at the time liable and at any date as at which the amount thereof is to be determined, the capitalized amount thereof that would appear on the face of a balance sheet of such person in accordance with GAAP. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York or the city in which the Corporate Trust Office is located, are authorized or obligated by law, regulation or executive order to close. "Capital Stock" means, with respect to any person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the Untied States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) certificates of deposit with a maturity of 180 days or less of any financial institution that is not organized under the laws of the United States, any state thereof or the District of Columbia that are rated at least A-1 by S&P or at least P-1 by Moody's or at least an equivalent rating category of another nationally recognized securities rating agency; (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the government of the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within 180 days from the date of acquisition; provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions With Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (v) notes held by the Guarantor or any Restricted Subsidiary (including without limitation LGII) which were obtained by the Guarantor or such Restricted Subsidiary in connection with Asset Sales (x) in the ordinary course of its funeral home, cemetery or cremation businesses or (y) which were required to be made pursuant to applicable federal or state law. 51 "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 35% of the total Voting Stock of the Guarantor or LGII, under circumstances where the Permitted Holders (i) "beneficially own" (as so defined) a lower percentage of the Voting Stock than such other "person" or "group" and (ii) do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Guarantor or LGII; (b) the Guarantor or LGII consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to another person, or another person consolidates with, or merges with or into, the Guarantor or LGII, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Guarantor or LGII is converted into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding Voting Stock of the Guarantor or LGII is converted into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation or (2) cash, securities and other property in an amount which could then be paid by the Guarantor or LGII as a Restricted Payment under the Indenture, or a combination thereof, and (ii) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 50% of the total Voting Stock of the surviving or transferee corporation; (c) at any time during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Guarantor or LGII (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders or stockholders of the Guarantor or LGII was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (including the failure of such individuals to be elected in a proxy contest involving a solicitation of proxies) to constitute a majority of the Board of Directors of the Guarantor or LGII then in office; or (d) the Guarantor or LGII is liquidated or dissolved or adopts a plan of liquidation other than a liquidation of LGII into the Guarantor. "Commission" means the Securities and Exchange Commission, as from time to time constituted. "Common Stock" means, with respect to any person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of, such person's common stock, whether outstanding at the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Consolidated Cash Flow Available for Fixed Charges" means, with respect to any person for any period, (A) the sum of, without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) Consolidated Interest Expense and (d) Consolidated Income Tax Expense less (B) any non-cash items increasing Consolidated Net Income for such period. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any person, the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of such person for the full fiscal quarter immediately preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (such full fiscal quarter being referred to herein as the "Prior Quarter") to the aggregate amount of Consolidated Fixed Charges of such person for the Prior Quarter. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to, without duplication, (a) the incurrence of any Indebtedness of such person or any of its Restricted Subsidiaries (and the application of the net proceeds thereof) during the 52 period commencing on the first day of the Prior Quarter to and including the Transaction Date (the "Reference Period"), including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation (and the application of the net proceeds thereof), as if such incurrence (and application) occurred on the first day of the Reference Period, and (b) any Material Asset Sales or Material Asset Acquisitions (including, without limitation, any Material Asset Acquisition giving rise to the need to make such calculation as a result of such person or one of its Restricted Subsidiaries (including any person who becomes a Restricted Subsidiary as a result of the Material Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness) occurring during the Reference Period, as if such Material Asset Sale or Material Asset Acquisition occurred on the first day of the Reference Period. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding Indebtedness determined on a fluctuating basis as at the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (ii) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Reference Period. If such person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third person, the above clause shall give effect to the incurrence of such guaranteed Indebtedness as if such person or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. For purposes of this calculation, a Material Asset Acquisition is an Asset Acquisition which is deemed by such person to be material for such purposes or which has a purchase price of $30,000,000 or more and a Material Asset Sale is one or more Asset Sales which relate to assets with an aggregate value of more than $30,000,000. "Consolidated Fixed Charges" means, with respect to any person for any period, the sum of, without duplication, the amounts for such period of (i) Consolidated Interest Expense and (ii) the product of (a) the aggregate amount of dividends and other distributions paid or accrued during such period in respect of Preferred Stock and Redeemable Capital Stock of such person and its Restricted Subsidiaries on a consolidated basis and (b) a multiplier, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such person, expressed as a decimal; provided, however, that the multiplier in clause (b) shall be one if such dividend or other distribution is fully tax deductible. "Consolidated Income Tax Expense" means, with respect to any person for any period, the provision for federal, state, local and foreign income taxes of such person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any person for any period, without duplication, the sum of (i) the interest expense of such person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Rate Protection Obligations, (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, with respect to any person, for any period, the consolidated net income (or loss) of such person and its Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income, by excluding, without duplication, (i) all extraordinary gains or losses, (ii) the portion of net income (but not losses) of such person and its Restricted Subsidiaries allocable to minority interests in unconsolidated persons to the extent that cash dividends or distributions have not actually been received by such person or one of its Restricted Subsidiaries, (iii) net income (or loss) of any person combined with such person or one of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss realized upon the termination of any employee pension benefit plan, on an after-tax basis, (v) gains or losses in respect of any 53 Asset Sales by such person or one of its Restricted Subsidiaries, (vi) the net income of any Restricted Subsidiary of such person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders and (vii) in the case of the year ended December 31, 1995, losses in respect of the Gulf National and Provident Litigation Expenses. "Consolidated Net Tangible Assets" of the Guarantor as at any date means the total amount of assets of the Guarantor and its Restricted Subsidiaries, less applicable reserves, on a consolidated basis as the end of the fiscal quarter immediately preceding such date, as determined in accordance with GAAP, less: (i) Intangible Assets and (ii) appropriate adjustments on account of minority interests of other persons holding equity investments in Restricted Subsidiaries, in the case of each of clauses (i) and (ii) above as reflected on the consolidated balance sheet of the Guarantor and its Restricted Subsidiaries as at the end of the fiscal quarter immediately preceding such date. "Consolidated Net Worth" means, with respect to any person at any date, the consolidated stockholders' equity of such person less the amount of such stockholders' equity attributable to Redeemable Capital Stock of such person and its Restricted Subsidiaries, as determined in accordance with GAAP. "Credit Agreements" means (i) until repaid with the proceeds of the Proposed Bank Facility, the Multi-Currency Revolver, the Canadian Revolver and the MEIP Facility, and thereafter the Proposed Bank Facility, as discussed under "Description of Certain Indebtedness--Other Indebtedness" and (ii) the Canadian five-year term credit facility described thereunder; in each case as any such instrument may be amended, supplemented or otherwise modified from time to time, and any successor or replacement facility. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Guarantor or any of its Restricted Subsidiaries against fluctuations in currency values. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Event of Default" has the meaning set forth under "Events of Default" herein. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any assets, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that, with respect to any transaction which involves an asset or assets in excess of $5,000,000, such determination shall be evidenced by resolutions of the Board of Directors of the Guarantor delivered to the Trustee. "Final Maturity Date" means April 15, 2001, with respect to the Series 1 Senior Notes, and April 15, 2003, with respect to the Series 2 Senior Notes. "GAAP" means Canadian GAAP consistently applied until such time as the Guarantor or LGII shall prepare their respective books of record in accordance with U.S. GAAP at which time and all times thereafter GAAP shall mean U.S. GAAP consistently applied. "Guarantees" means the guarantees of the Notes created pursuant to the Indenture. "guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. 54 "Guarantor" shall mean The Loewen Group Inc., and shall include any successor replacing such Guarantor pursuant to the Indenture, and thereafter means such successor. "Gulf National and Provident Litigation Expenses" means expenses of up to $200,000,000 recorded by the Guarantor in its consolidated financial statements for the year ended December 31, 1995 in connection with the conduct and settlement of lawsuits brought against the Guarantor by (i) J.J. O'Keefe, Sr., Gulf National Insurance Company and certain affiliates thereof before the courts of the State of Mississippi and (ii) Provident American Corporation and a subsidiary thereof before the United States District Court for the Eastern District of Pennsylvania. "Holder" means the person in whose name an Exchange Note is registered on the Registrar's books. "Indebtedness" means, with respect to any person, without duplication, (a) all liabilities of such person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business and which are not overdue by more than 90 days, but excluding, without limitation, all obligations, contingent or otherwise, of such person in connection with any undrawn letters of credit, banker's acceptance or other similar credit transaction, (b) all obligations of such person evidenced by bonds, notes, debentures or other similar instruments, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (d) all Capitalized Lease Obligations of such person, (e) all Indebtedness referred to in the preceding clauses of other persons and all dividends of other persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (f) all guarantees of Indebtedness referred to in this definition by such person, (g) all Redeemable Capital Stock of such person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends, (h) all obligations under or in respect of Currency Agreements and Interest Rate Protection Obligations of such person, (i) any Preferred Stock of any Restricted Subsidiary of such person valued at the sum of (without duplication) (A) the liquidation preference thereof, (B) any mandatory redemption payment obligations in respect thereof and (C) accrued dividends thereon, and (j) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (a) through (i) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. For purposes of this definition, the term "Indebtedness" shall not include (i) Indebtedness of a Wholly-Owned Subsidiary owed to and held by the Guarantor, LGII or another Wholly-Owned Subsidiary, in each case which is not subordinate in right of payment to any Indebtedness of such Subsidiary, except that (a) any transfer of such Indebtedness by the Guarantor, LGII or a Wholly-Owned Subsidiary (other than to the Guarantor, LGII or to a Wholly-Owned Subsidiary) and (b) the sale, transfer or other disposition by the Guarantor, LGII or any Restricted Subsidiary of the Guarantor or LGII of Capital Stock of a Wholly-Owned Subsidiary which is owed Indebtedness of another Wholly-Owned Subsidiary such that it ceases to be a Wholly-Owned Subsidiary of the Guarantor or LGII shall, in each case, be an incurrence of Indebtedness by such Restricted Subsidiary subject to the other provisions of the Indenture; and (ii) Indebtedness of the Guarantor or LGII owed to and held by a Wholly-Owned Subsidiary of the Guarantor or LGII which is unsecured and subordinate in right of payment to the payment and performance of the Guarantor's or LGII's obligations under the Indenture and the Senior Notes except that (a) any transfer of such Indebtedness by a Wholly-Owned Subsidiary of the Guarantor or LGII (other than to another Wholly-Owned Subsidiary of the Guarantor or LGII) and (b) the sale, transfer or other disposition 55 by the Guarantor or LGII or any Restricted Subsidiary of the Guarantor or LGII of Capital Stock of a Wholly-Owned Subsidiary which holds Indebtedness of the Guarantor or LGII such that it ceases to be a Wholly-Owned Subsidiary shall, in each case, be an incurrence of Indebtedness by the Guarantor or LGII, as the case may be, subject to the other provisions of the Indenture. "Independent Financial Advisor" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Guarantor or LGII and (ii) which, in the judgment of the Board of Directors of the Guarantor, is otherwise independent and qualified to perform the task for which it is to be engaged. "Interest Rate Protection Agreement" means any arrangement with any other person whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Interest Rate Protection Obligations" means the obligations of any person pursuant to an Interest Rate Protection Agreement. "Investment" means, with respect to any person, any direct or indirect loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other person. "Investments" shall exclude extensions of trade credit by the Guarantor and its Restricted Subsidiaries (including without limitation LGII) in the ordinary course of business in accordance with normal trade practices of the Guarantor or such Restricted Subsidiary, as the case may be. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind. A person shall be deemed to own subject to a Lien any property which such person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, purchase or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Guarantor or any Restricted Subsidiary of the Guarantor (including without limitation LGII) net of (i) brokerage commissions and other fees and expenses (including, without limitation, fees and expenses of legal counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any person (other than the Guarantor or any Restricted Subsidiary of the Guarantor) owning a beneficial interest in the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Guarantor or any Restricted Subsidiary of the Guarantor, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Guarantor or any Restricted Subsidiary of the Guarantor, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an officers' certificate delivered to the Trustee. 56 "Pari Passu Indebtedness" means Indebtedness of LGII or the Guarantor which ranks pari passu in right of payment with the Notes or the Guarantees, as the case may be. "Permitted Holders" mean (i) Raymond Loewen and Anne Loewen, taken together and (ii) in the case of LGII, the Guarantor. "Permitted Indebtedness" means, without duplication, each of the following: (a) The Notes and Indebtedness of the Guarantor evidenced by the Guarantees; (b) Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII) outstanding on the Issue Date (other than Indebtedness under the Credit Agreements); (c) Indebtedness of the Guarantor under the Credit Agreements in an aggregate principal amount at any one time outstanding not to exceed $750,000,000 less the Net Proceeds of any Asset Sale that are applied to repay, and permanently reduce the commitments under, the Credit Agreements (as required by the terms thereof); (d) (i) Interest Rate Protection Obligations of the Guarantor covering Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII); (ii) Interest Rate Protection Obligations of any Restricted Subsidiary of the Guarantor covering Indebtedness of such Restricted Subsidiary; provided, however, that, in the case of either clause (i) or (ii), (x) any Indebtedness to which any such Interest Rate Protection Obligations relate bears interest at fluctuating interest rates and is otherwise permitted to be incurred under this covenant and (y) the notional principal amount of any such Interest Rate Protection Obligations does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (e) Indebtedness under Currency Agreements; provided, however, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII) outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (f) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence; (g) Indebtedness incurred in respect of performance bonds or letters of credit in lieu thereof provided in the ordinary course of business; (h) Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII) represented by letters of credit for the account of the Guarantor and its Restricted Subsidiaries in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (i) Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII) in addition to that described in clauses (a) through (h) above, in an aggregate principal amount outstanding at any time not exceeding $5,000,000; and (j) (i) Indebtedness of the Guarantor the proceeds of which are used solely to refinance (whether by amendment, renewal, extension or refunding) Indebtedness of the Guarantor and its Restricted Subsidiaries (including without limitation LGII) and (ii) Indebtedness of any Restricted Subsidiary of the Guarantor the proceeds of which are used solely to refinance (whether by amendment, renewal, extension or refunding) Indebtedness of such Restricted Subsidiary, in each case other than the Indebtedness refinanced, redeemed or retired as described under "Use of Proceeds" herein or incurred under clause (c), (d), (e), (f), (g), (h), or (i) of this covenant; provided, however, that (x) the principal amount of Indebtedness incurred pursuant to this clause (j) (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such 57 Indebtedness) shall not exceed the sum of the principal amount of Indebtedness so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of such Indebtedness or the amount of any premium reasonably determined by the Board of Directors of the Guarantor as necessary to accomplish such refinancing by means of a tender offer or privately negotiated purchase, plus the amount of expenses in connection therewith, (y) in the case of Indebtedness incurred by the Guarantor pursuant to this clause (j) to refinance Pari Passu Indebtedness, such Indebtedness constitutes Pari Passu Indebtedness. "Permitted Investments" means any of the following: (i) Investments in any Wholly-Owned Subsidiary of the Guarantor (including (a) LGII and (b) any person that pursuant to such Investment becomes a Wholly-Owned Subsidiary of the Guarantor) and any person that is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Guarantor or any Wholly-Owned Subsidiary of the Guarantor at the time such Investment is made; (ii) Investments in Cash Equivalents; (iii) Investments in Currency Agreements on commercially reasonable terms entered into by the Guarantor or any of its Restricted Subsidiaries in the ordinary course of business in connection with the operations of the business of the Guarantor or its Restricted Subsidiaries to hedge against fluctuations in foreign exchange rates; (iv) loans or advances to officers, employees or consultants of the Guarantor and its Restricted Subsidiaries for travel and moving expenses in the ordinary course of business for bona fide business purposes of the Guarantor and its Restricted Subsidiaries; (v) other loans or advances to officers, employees or consultants of the Guarantor and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes of the Guarantor and its Restricted Subsidiaries not in excess of $10,000,000 in the aggregate at any one time outstanding; (vi) Investments in evidences of Indebtedness, securities or other property received from another person by the Guarantor or any of its Restricted Subsidiaries in connection with any bankruptcy proceeding or by reason of a composition or readjustment of debt or a reorganization of such person or as a result of foreclosure, perfection or enforcement of any Lien in exchange for evidences of Indebtedness, securities or other property of such person held by the Guarantor or any of its Restricted Subsidiaries, or for other liabilities or obligations of such other person to the Guarantor or any of its Restricted Subsidiaries that were created, in accordance with the terms of the Indenture; (vii) Investments in Interest Rate Protection Agreements on commercially reasonably terms entered into by the Guarantor or any of its Restricted Subsidiaries in the ordinary course of business in connection with the operations of the Guarantor and its Restricted Subsidiaries to hedge against fluctuations in interest rates; (viii) Investments of funds received by the Guarantor or its Restricted Subsidiaries (including without limitation LGII) in the ordinary course of business, which funds are required to be held in trust for the benefit of others by the Guarantor or such Restricted Subsidiary, as the case may be, and which funds do not constitute assets or liabilities of the Guarantor or such Restricted Subsidiary; (ix) the acquisition of insurance company assets from S.I. Acquisition Associates, L.P., and Investments not in excess of $50,000,000 in the aggregate in other Unrestricted Subsidiaries which are engaged in the insurance business; and (x) Investments not in excess of $50,000,000 in persons (other than Wholly-Owned Subsidiaries) engaged in businesses incidental to the funeral home, cemetery and cremation businesses of the Guarantor and its Restricted Subsidiaries. "Permitted Liens" means the following types of Liens: (a) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Guarantor or any of its Restricted Subsidiaries (including without limitation LGII) shall have set aside on its books such reserves as may be required pursuant to GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, governmental contracts, performance 58 and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (d) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (e) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Guarantor or any of its Restricted Subsidiaries (including without limitation LGII); (f) any interest or title of a lessor under any Capitalized Lease Obligation or operating lease; (g) any Lien existing on any asset of any corporation at the time such corporation becomes a Restricted Subsidiary and not created in contemplation of such event; (h) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset; provided, that such Lien attaches to such asset concurrently with or within 18 months after the acquisition or completion thereof; (i) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Guarantor or a Restricted Subsidiary and not created in contemplation of such event; (j) any Lien existing on any asset prior to the acquisition thereof by the Guarantor or a Restricted Subsidiary and not created in contemplation of such acquisition; and (k) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and (l) any extension, renewal or replacement of any Lien permitted by the preceding clauses (g), (h), (i) or (j) hereof in respect of the same property or assets theretofore subject to such Lien in connection with the extension, renewal or refunding of the Indebtedness secured thereby; provided that (1) such Lien shall attach solely to the same such property or assets and (2) such extension, renewal or refunding of such Indebtedness shall be without increase in the principal remaining unpaid as at the date of such extension, renewal or refunding. "Person" means any individual, corporation, limited liability company partnership, joint venture, association, joint-stock company, trust, charitable foundation, unincorporated organization, government or any agency or political subdivision thereof. "Preferred Securities" means, with respect to a Special Finance Subsidiary, any securities of such Subsidiary treated for accounting purposes as an equity security that has preferential rights to any other security of such person with respect to dividends or redemptions or upon liquidation. "Preferred Stock" means, with respect to any person, any Capital Stock of such person that has preferential rights to any other Capital Stock of such person with respect to dividends or redemptions or upon liquidation and any Preferred Securities. "Redeemable Capital Stock" means any shares of any class or series of Capital Stock, that, either by the terms thereof, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is or upon the happening of an event or passage of time would be, required to be redeemed prior to the Stated Maturity with respect to the principal of any Note or is redeemable at the option of the holder thereof at any time prior to any such Stated Maturity Date, or is convertible into or exchangeable for debt securities at any time prior to any such Stated Maturity. "Restricted Subsidiary" means any Subsidiary of the Guarantor other than an Unrestricted Subsidiary. "Sale-Leaseback Transaction" of any person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such person of any property or asset of such person 59 which has been or is being sold or transferred by such person after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty. "S&P" means Standard & Poor's Corporation, and its successors. "Seller Financing Indebtedness" means a purchase money Indebtedness issued to the seller of a business or other assets for, and not in excess of, the purchase price thereof. "Significant Subsidiary" shall mean a Restricted Subsidiary which is a "Significant Subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the Securities Act. "Special Finance Subsidiary" means a Restricted Subsidiary whose sole assets are debt obligations of LGII or the Guarantor and whose sole liabilities are Preferred Securities the proceeds from the sale of which are or have been advanced to LGII or the Guarantor. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable. "Subsidiary" means, with respect to any person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such person, by one or more Subsidiaries of such person or by such person and one or more Subsidiaries thereof and (ii) any other person (other than a corporation), including, without limitation, a joint venture, in which such person, one or more Subsidiaries thereof or such person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has at least majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other person performing similar functions). For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Subsidiary. "Unrestricted Subsidiary" means (i) First Capital Life Insurance Company of Louisiana, National Capital Life Insurance Company or a Subsidiary that has acquired insurance company assets from S.I. Acquisition Associates, L.P. or (ii) a Subsidiary of the Guarantor declared by the Board of Directors of the Guarantor to be an Unrestricted Subsidiary; provided, that no such Subsidiary shall be declared to be an Unrestricted Subsidiary unless (x) none of its properties or assets were owned by the Guarantor or any of its Subsidiaries prior to the Issue Date, other than any such assets as are transferred to such Unrestricted Subsidiary in accordance with the covenant described under "-- Certain Covenants; Limitation on Restricted Payments" above, (y) its properties and assets, to the extent that they secure Indebtedness, secure only Non-Recourse Indebtedness and (z) it has no Indebtedness other than Non- Recourse Indebtedness. As used above, "Non-Recourse Indebtedness" means Indebtedness as to which (i) neither the Guarantor nor any of its Subsidiaries (other than the relevant Unrestricted Subsidiary or another Unrestricted Subsidiary) (1) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness), (2) guarantees or is otherwise directly or indirectly liable or (3) constitutes the lender (in each case, other than pursuant to and in compliance with the covenant described under "--Certain Covenants; Limitation on Restricted Payments") and (ii) no default with respect to such Indebtedness (including any rights which the holders thereof may have to take enforcement action against the relevant Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Guarantor or its Subsidiaries (other than Unrestricted Subsidiaries) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. 60 "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect a least a majority of the board of directors, managers or trustees of any person (irrespective of whether or not, at the time, Capital Stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "Wholly-Owned Subsidiary" means (i) any Restricted Subsidiary of the Guarantor of which 100% of the outstanding Capital Stock is owned by the Guarantor or one or more Wholly-Owned Subsidiaries of the Guarantor or by the Guarantor and one or more Wholly-Owned Subsidiaries of the Guarantor, including LGII, or (ii) any Subsidiary, at least 66 2/3% of the outstanding voting securities of which, and all of the outstanding shares entitled to receive dividends or other distributions of which, shall at the time be owned or controlled, directly or indirectly, by the Guarantor or one or more Wholly- Owned Subsidiaries of the Guarantor or by the Guarantor and one or more Wholly-Owned Subsidiaries of the Guarantor, including LGII. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Subsidiary. 61 DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS On May 31, 1996, LGII closed a new $750 million secured revolving credit facility with a bank syndicate. The New Bank Facility matures in May 2001. The Collateral for the New Bank Facility includes the shares held by Loewen of substantially all of the subsidiaries in which Loewen directly or indirectly holds more than a 50% voting or economic interest (other than LGII) and all of the financial assets of LGII (LGII does not have material assets other than financial assets). The Collateral is held by a trustee for the benefit of the various holders of the Pari Passu Indebtedness under a Collateral Trust Agreement executed by Loewen, LGII, certain of their subsidiaries, and the Trustee thereunder. Amounts borrowed under the New Bank Facility will accrue interest at certain alternative rates selected by LGII. As at ., 1996, the amount outstanding under the New Bank Facility was $., and such outstanding amount bore interest at .% per annum. The Pari Passu Indebtedness is described below. The holders of Pari Passu Indebtedness share in the Collateral on a pari passu basis. As at ., 1996, LGII and Loewen had outstanding an aggregate of $ . million senior notes (the "Senior Guaranteed Notes"). The Senior Guaranteed Notes, which consist of five series issued in 1991, 1993 and 1994, bear interest at rates ranging from 6.49% to 9.93%, and have terms of seven to ten years. Each series of Senior Guaranteed Notes issued by LGII is guaranteed by Loewen, and each series of Senior Guaranteed Notes issued by Loewen is guaranteed by LGII. Loewen has a Cdn.$50.0 million unsecured revolving credit facility which matures in April 1997 (the "Canadian Revolver"). As at December 31, 1995 and . 1996, Loewen had borrowed Cdn.$43.0 million and Cdn.$ . million, respectively, under the Canadian Revolver. The lender has capped the Canadian Revolver at Cdn.$45.0 million as a result of the Gulf National award and settlement. A subsidiary of Loewen has a $121.3 million secured term credit facility implemented in connection with the 1994 Management Equity Investment Plan that will terminate in July 2000 (the "MEIP Facility"). No further borrowings are available under this facility. Loewen has a Cdn.$35.0 million five-year unsecured term credit facility with a bank syndicate that will terminate in January 2000 (the "Canadian Term Loan"). LGII provided an unsecured guarantee of the obligations under such credit facility. No further borrowings are available under this facility. The New Bank Facility and the credit facilities that comprise the Pari Passu Indebtedness contain various covenants, including covenants restricting payment of dividends on Common and Preferred Shares, limiting redemption or repurchase of shares, limiting disposition of assets, limiting the amount of additional debt, limiting the amount of capital expenditures and requiring the maintenance of specified financial ratios. As at March 31, 1996, Loewen was in compliance with all such covenants that were in effect at that time. 62 PLAN OF DISTRIBUTION Based on interpretations by the staff of the Commission set forth in no action letters issued to third-parties, LGII and Loewen believe that, except as described below, Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by respective holders thereof without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such Exchange Notes are acquired in the ordinary course of such holder's business and (ii) such holder does not intend to participate in, has no arrangement or understanding with any person to participate in, and is not engaged in and does not intend to engage in, a distribution of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of LGII or Loewen within the meaning of Rule 405 under the Securities Act or that is a broker-dealer that purchased Outstanding Notes from LGII to resell pursuant to an exemption from registration (a) cannot rely on such interpretations by the staff of the Commission, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of such Outstanding Notes. Any holder who tenders Outstanding Notes in the Exchange Offer with the intention or for the purpose of participating in a distribution of the Exchange Notes cannot rely on such interpretation by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Unless an exemption from registration is otherwise available, any such resale transaction should be covered by an effective registration statement containing the selling security holders information required by Item 507 of Regulation S-K under the Securities Act. To date, the staff of the Commission has taken the position that a broken-dealer that has acquired securities in exchange for securities that were acquired by such broker-dealer as a result of market-making activities or other trading activities (a "Participating Broker-Dealer") may fulfill its prospectus delivery requirements with the prospectus contained in an exchange offer registration statement. Pursuant to the Registration Rights Agreement, LGII has agreed to permit Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use this Prospectus in connection with the resale of such Exchange Notes. LGII and Loewen have agreed that, for a period of 180 days after the Expiration Date, they will make this Prospectus, and any amendment or supplement to this Prospectus, available to any broker-dealer that requests such documents in the Letter of Transmittal. Each holder of Outstanding Notes who wishes to exchange its Outstanding Notes for Exchange Notes in the Exchange Offer will be required to make certain representations to LGII as set forth in "The Exchange Offer-- Procedures for Tendering." In addition, each holder who is a broker-dealer and who receives Exchange Notes for its own account in exchange for Outstanding Notes that were acquired by it as a result of market-making activities or other trading activities, will be required to acknowledge that it will deliver a prospectus in connection with any resale by its of such Exchange Notes. Neither LGII nor Loewen will receive any proceeds from the issuance of the Exchange Notes. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account in connection with the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be "underwriting compensation" under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. LGII has agreed to pay all expenses incidental to the Exchange Offer other than commissions and concessions of any brokers or dealers and will indemnify holders of the Outstanding Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act, as set forth in the Registration Rights Agreement. 63 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS GENERAL In the opinion of Thelen, Marrin, Johnson & Bridges, United States counsel to LGII and Loewen, the following section accurately summarizes the material United States federal income tax considerations that may be relevant to the acquisition, holding and disposition of the Exchange Notes by a U.S. Holder (as defined) who holds the Outstanding Notes, and will hold the Exchange Notes, as capital assets. The following section also outlines the principal United States federal income tax considerations that may be relevant to the holding of Exchange Notes by certain Non-U.S. Holders (as defined). This section is a summary of certain United States federal income tax considerations that may be relevant to prospective holders of Exchange Notes and represents the opinion of Thelen, Marrin, Johnson & Bridges insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder and current administrative rulings and court decisions, all of which are subject to change, possibly with retroactive effect. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting holders of Exchange Notes. Moreover, the following discussion does not address the circumstances of certain types of holders subject to special treatment under federal income tax law (for example, dealers in securities, banks, tax-exempt organizations, and insurance companies). Accordingly, each holder of Outstanding Notes should consult, and should depend on, his or her own tax adviser in analyzing the federal, state, local and foreign tax consequences of the acquisition, ownership or disposition of Exchange Notes. As used in the discussion which follows, the term "U.S. Holder" means a beneficial owner of Notes that, for United States federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source. The term "Non-U.S. Holder" means a beneficial owner of Notes that, for United States federal income tax purposes, is not a U.S. Holder. TAX CONSEQUENCES TO U.S. HOLDERS Exchange Offer The exchange of the Outstanding Notes for Exchange Notes pursuant to the Exchange Offer will not be treated as an "exchange" because the Exchange Notes will not be considered to differ materially in kind or extent from the Outstanding Notes. Rather, the Exchange Notes received by a holder of the Outstanding Notes will be treated as a continuation of the Outstanding Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging the Outstanding Notes for the Exchange Notes pursuant to the Exchange Offer. Interest Except as provided below in respect of certain Additional Interest (as described below), a holder of a Note will be required to report stated interest on the Note as interest income in accordance with the holder's method of accounting for tax purposes. Under the tax rules relating to original issue discount ("OID"), holders of debt instruments issued at a discount that exceeds a nominal amount may be required to recognize taxable interest income prior to the receipt 64 of cash. The Company believes that the Outstanding Notes were issued without taxable OID. The Treasury Regulations relating to OID permit the accrual of OID to be determined, in the case of a debt instrument with alternative payment schedules, based upon the payment schedule most likely to occur, as determined by the issuer of the debt, so long as the timing and amounts of each payment schedule are known as of the issue date. Under certain circumstances, including failure of the Company to register the Notes pursuant to an effective registration statement, additional interest (the "Additional Interest") will accrue on the Notes in the manner described in "Description of Exchange Notes--Registration Rights Agreement." The possibility of Additional Interest could result in an alternative payment schedule. The Company does not intend to treat the possibility of Additional Interest as affecting the computation of OID or the yield to maturity. If a holder of a Note becomes entitled to Additional Interest, then, solely for purposes of determining the accrual of OID, the yield to maturity on the Notes will be determined by treating the Notes as reissued on the date that it is determined that such Additional Interest will be required to be paid, for an amount equal to their adjusted issue price on such date. The foregoing position taken by the Company will be binding on all holders, unless a holder explicitly discloses that its determination of the yield to maturity is different from the Company's determination on a statement attached to the holder's timely filed federal income tax return for the year that includes the acquisition date of the Notes. Tax Basis in Outstanding Notes and Exchange Notes A holder's tax basis in a Note will be the holder's purchase price for the Note, increased for OID, if any, previously included in income by the holder with respect to the Notes and not yet paid. If a holder of an Outstanding Note exchanges the Outstanding Note for an Exchange Note pursuant to the Exchange Offer, the tax basis of the Exchange Note immediately after such exchange should equal the holder's tax basis in the Outstanding Note immediately prior to the Exchange. Disposition of Outstanding Notes or Exchange Notes The sale, exchange, redemption or other disposition of a Note will be a taxable event, except in the case of an exchange pursuant to the Exchange Offer (see the above discussion), or certain exchanges in which gain or loss is not recognized under the Code. A holder will recognize gain or loss equal to the difference between (i) the amount of cash (plus the fair market value of any property) received upon such sale, exchange, redemption or other taxable disposition of the Outstanding Note or the Exchange Note (except to the extent attributable to accrued interest) and (ii) the holder's adjusted tax basis in such Outstanding Note or Exchange Note. Such gain or loss will be capital gain or loss, and will be long term if the Note has been held for more than one year at the time of the sale or other disposition. The holding period of an Exchange Note will include the holding period of the Outstanding Note surrendered in exchange therefor. Purchasers of Notes at Other than Original Issuance Price The foregoing does not discuss special rules that may affect the treatment of purchasers that acquire Notes other than at par, including those provisions of the Internal Revenue Code relating to the treatment of "market discount," "bond premium" and "amortizable bond premium." Any such purchaser should consult its tax advisor as to the consequences to it of the acquisition, ownership, and disposition of Notes. TAX CONSEQUENCES TO NON-U.S. HOLDERS In the case of a Non-U.S. Holder, such Non-U.S. Holder will not be subject to U.S. federal income tax, including U.S. withholding tax, on interest paid or OID (if any) on the Notes under the "portfolio interest" exception, provided that (i) the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (ii) the Non-U.S. Holder is not (a) a bank receiving interest or OID pursuant to a loan agreement entered into in the ordinary course of its trade or business or (b) a controlled foreign corporation that is related to the Company through stock ownership, (iii) such interest or OID is not effectively connected with a United States trade or business, and (iv) either (a) the beneficial owner of the Notes certifies to the Company or its agent, under penalties of perjury, that the beneficial 65 owner is a foreign person and provides a completed IRS Form W-8 ("Certificate of Foreign Status") or (b) a securities clearing organization, bank or other financial institution which holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the Notes, certifies to the Company or its agency, under penalties of perjury, that it has received Form W-8 from the beneficial owner or that it has received from another financial institution a Form W-8 and furnishes the payor with a copy thereof. If any of the situations described in proviso (i), (ii) or (iv) of the preceding sentence do not exist, then, except as described below for effectively connected income, interest paid and OID, if any, on the Notes would be subject to U.S. withholding tax at a 30% rate (or lower tax treaty rate as evidenced by an IRS Form 1001 (Ownership Exemption or Reduced Rate Certificate)). If the income on the Notes is effectively connected with a Non- U.S. Holder's conduct of a trade or business within the United States, then, absent tax treaty protection, the Non-U.S. Holder will be subject to U.S. federal income tax on such income in essentially the same manner as a United States person and, in the case of a foreign corporation, may also be subject to the U.S. branch profits tax. On April 15, 1996, the Internal Revenue Service issued proposed Treasury regulations setting forth revised procedures for claiming the benefit of the portfolio interest exemption and treaty withholding rate reductions. If these rules, which are proposed to take effect in 1998, are adopted in their current form, non-U.S. holders of the Notes could continue to claim the benefit of the portfolio debt exemption by filing a Form W-8 with the issuer. Form W-8 would also be used to claim the benefit of applicable tax treaty provisions. In addition, the existing procedures under which financial institutions are permitted to provide certifications of foreign status on behalf of their non- U.S. customers would be continued and expanded. BACKUP WITHHOLDING Unless a holder provides its correct taxpayer identification number (employer identification number or social security number) to the Company and certifies that such number is correct, under the federal income tax backup withholding rules, 31% of (i) the interest paid on the Notes, and (ii) proceeds of sale of the Notes, must be withheld and remitted to the United States Treasury. However, certain holders (including, among others, certain foreign individuals) are not subject to these backup withholding and reporting requirements. For a foreign individual to qualify as an exempt foreign recipient, that holder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt foreign status. A Form W-8 filed to claim the benefit of the portfolio interest exception is generally sufficient to prevent backup withholding in the case of an exempt foreign recipient. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. CERTAIN CANADIAN FEDERAL TAX CONSIDERATIONS In the opinion of Russell & DuMoulin, Canadian counsel to LGII and Loewen, the following section accurately summarizes the material Canadian federal income tax considerations that may be relevant to the acquisition, holding and disposition of the Exchange Notes by an individual who is resident in the United States and not in Canada. This section is a summary of certain Canadian federal income tax considerations that may be relevant to holders of Outstanding Notes who are resident in the United States and not resident in Canada. This section is based upon the current provisions of the Income Tax Act of Canada (the "Tax Act"), the regulations thereunder and on counsel's understanding of the current administrative practices of Revenue Canada Customs, Excise and Taxation. The provisions of the Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-U.S. Income Tax Convention (1980) (the "Tax Treaty"). This discussion is general only and is not a substitute for independent advice from each Note holder's own tax advisor. There will be no Canadian income tax consequences to a holder of Outstanding Notes in connection with the exchange of the Outstanding Notes for Exchange Notes pursuant to the Exchange Offer. Interest income paid by LGII will not subject holders of Exchange Notes to any Canadian income taxes or withholding taxes. However, any payments made by Loewen to or for the benefit of the holders of Exchange 66 Notes pursuant to the Guarantees will be subject to Canadian withholding tax to the extent such payments represent payment made as, on account or in lieu of payment of interest. Under the Tax Act and the Tax Treaty, the rate of such Canadian withholding tax would be 15%. LEGAL MATTERS The validity of the Exchange Notes, certain matters of New York law relating to the Guarantees and certain statements as to United States taxation in the Prospectus will be passed upon for LGII and Loewen by Thelen, Marrin, Johnson & Bridges, San Francisco, California. The validilty of the Guarantees will be passed upon for Loewen by Russell & DuMoulin, Vancouver, Canada. EXPERTS The consolidated financial statements of the Company incorporated by reference in this Prospectus have been audited by KPMG Peat Marwick Thorne, Chartered Accountants, for the periods indicated in its report thereon, which is incorporated herein by reference. Such financial statements have been so incorporated in reliance on such report given on the authority of KPMG Peat Marwick Thorne as experts in accounting and auditing. ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES AGAINST GUARANTOR Loewen is a corporation organized under and governed by the laws of the Province of British Columbia, Canada. Certain of its directors, controlling persons, and officers are residents of Canada, and all or a portion of the assets of such persons and of Loewen are located outside the United States. As a result, it may be difficult or impossible for United States holders of the Notes seeking to enforce the Guarantor's obligations under the Guarantees to effect service within the United States upon Loewen (although it may be possible to effect service upon direct or indirect United States subsidiaries of Loewen) and those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon the civil liability of such persons under the Securities Act or the Exchange Act, to the extent such judgments exceed such person's United States assets. Loewen has been advised by Russell & DuMoulin, its Canadian counsel, that there is doubt as to the enforceability in Canada against any of these persons, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated solely on the Securities Act or the Exchange Act. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents heretofore filed by Loewen with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act (File No. 0-18429) are hereby incorporated herein by reference: (i) Loewen's Annual Report on Form 10-K for the year ended December 31, 1995 (as amended on Form 10-K/A, filed June 20, 1996); (ii) Loewen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (iii) Loewen's Current Reports on Form 8-K dated January 3, 1996, January 17, 1996, January 24, 1996, January 26, 1996, February 6, 1996, February 12, 1996, February 27, 1996, March 4, 1996, March 13, 1996, March 20, 1996, March 26, 1996 (as amended on Form 8-K/A, filed June 10, 1996), March 31, 1996, May 1, 1996, May 8, 1996, May 24, 1996, May 31, 1996, June 4, 1996 and June 6, 1996; and (iv) Loewen's Reports by Issuer of Securities Quoted on Nasdaq Interdealer Quotation System on Form 10-C dated February 27, 1996 and March 20, 1996. All documents filed by Loewen pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus and prior to 180 days after the Expiration Date shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is incorporated or deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 67 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------ TABLE OF CONTENTS
PAGE ---- Available Information...................................................... 3 Financial Information...................................................... 3 Prospectus Summary......................................................... 4 Risk Factors............................................................... 14 Recent Developments........................................................ 16 Use of Proceeds............................................................ 19 Consolidated Capitalization................................................ 19 The Exchange Offer......................................................... 20 Business................................................................... 27 Legal Proceedings.......................................................... 33 Description of Exchange Notes.............................................. 36 Description of Certain Other Indebtedness.................................. 62 Plan of Distribution....................................................... 63 Certain U.S. Federal Income Tax Considerations............................. 64 Certain Canadian Federal Tax Considerations................................ 66 Legal Matters.............................................................. 67 Experts.................................................................... 67 Enforceability of Certain Civil Liabilities Against Guarantor.............. 67 Incorporation of Certain Information by Reference.......................... 67
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LOEWEN GROUP INTERNATIONAL, INC. $225,000,000 7 1/2% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001FOR ALL OUTSTANDING 7 1/2% SERIES 1 SENIOR GUARANTEED NOTES DUE 2001AND $125,000,000 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003FOR ALL OUTSTANDING 8 1/4% SERIES 2 SENIOR GUARANTEED NOTES DUE 2003 GUARANTEED BY THE LOEWEN GROUP INC. [LOGO APPEARS HERE] -------- PROSPECTUS -------- JUNE , 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS LGII Section 145 of the Delaware General Corporation Law ("Delaware Law") permits, subject to certain conditions, a corporation to indemnify its directors, officers, employees and agents against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such director, officer, employee or agent in connection with threatened, pending or completed actions, suits and proceedings (other than actions by or in the right of the corporation ) in or to which any of such persons is a party or is threatened to be made a party. Section 5.01 of the By-laws of LGII provides that LGII may indemnify its directors, officers, employees and agents to the fullest extent permitted by Delaware Law, including the advancement of funds, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of LGII and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The Board of Directors of LGII has determined that the expenses of the officers named in the Shareholder Suits incurred in defending the Shareholder Suits should be paid by LGII from time to time in advance of the final disposition of such proceedings, subject to each such individual entering into an undertaking to repay all amounts paid by LGII if it is ultimately determined that such individual is not entitled to be indemnified by LGII under the Delaware General Corporation Law. LOEWEN Section 152 of the Company Act of British Columbia provides in part that: A company may, with the approval of the court, indemnify a director or former director of the company or a director or former director of a corporation of which it is or was a shareholder, and his heirs and personal representatives, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director, including an action brought by the company or corporation, if (a) he acted honestly and in good faith with a view to the best interests of the corporation of which his is or was a director; and (b) in the case of a criminal or administrative action or proceeding, he had reasonable grounds for believing that his conduct was lawful. Part 19 of Loewen's Articles provides that Loewen shall indemnify its directors generally in accordance with the provisions of Section 152 and that Loewen shall indemnify its Secretary and any Assistant Secretary against all costs, charges and expenses incurred that have arisen as a result of serving Loewen in such capacity. The Articles further provide that Loewen may indemnify any of its officers, employees or agents against all costs, charges and expenses incurred as a result of acting as an officer, employee and agent of Loewen. II-1 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits Exhibit Number Description 4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING INDENTURES 4.1 Indenture, dated as of March 20, 1996, by and between LGII, Loewen, as guarantor of the obligations of LGII under the Indenture, and Fleet National Bank of Connecticut, as Trustee, with respect to 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and 8 1/4% Series 2 Senior Guaranteed Notes due 2003 (4) 4.2 Purchase Agreement, dated as of March 13, 1996, by and between LGII, Loewen and the Initial Purchasers* 4.3 Receipt Agreement, dated as of January 3, 1996, for the Cumulative Redeemable Convertible First Preferred Shares Series C of Loewen (4) 4.4 Shareholder Protection Rights Plan, dated as of April 20, 1990, as amended on May 24, 1990 and April 7, 1994 and reconfirmed on May 17, 1995 (2) 4.5 Amended and Restated Multicurrency Credit Agreement, dated as of May 11, 1995, by and between LGII, as borrower, Loewen, as guarantor, the banks named therein as lenders and The First National Bank of Chicago, as agent for the banks named therein as lenders (3) 4.6 Multicurrency Credit Agreement, dated as of May 11, 1995, by and between LGII, as borrower, Loewen, as guarantor, the banks named therein as lenders and The First National Bank of Chicago, as agent for the banks named therein as lenders (3) 4.7 Zero Coupon Loan Agreement, dated as of November 1, 1994, by and between WLSP Investment Partners I, Neweol Finance B.V., Electrolux Holdings B.V., Man Producten Rotterdam B.V., Adinvest A.G., and Wachovia Bank of Georgia, N.A. (2) 4.8 MIPS Guarantee Agreement, dated August 15, 1994 (1) 4.9 Indenture, dated as of August 15, 1994, by and between LGII, as issuer, Loewen, as guarantor, and State Street Bank and Trust Company, as trustee with respect to 9.45% Junior Subordinated Debentures, Series A, due 2024, issued by LGII and guaranteed by Loewen (1) 4.10 Exchange Acknowledgment by Loewen, with respect to the 1994 Exchangeable Floating Rate Debentures due July 15, 2001 issued by LGII, dated June 15, 1994 (2) 4.11 1994 MEIP Credit Agreement, dated as of June 14, 1994, by and between Loewen Management Investment Corporation, in its capacity as agent for LGII ("LMIC"), Loewen and the banks listed therein (the "MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for the MEIP Banks ("MEIP Agent") (2) 4.12 Guaranty dated as of June 14, 1994 by Loewen in favor of the MEIP Agent for the ratable benefit of the MEIP Banks (2) 4.13 Guaranty dated as of June 14, 1994 by LGII in favor of the MEIP Agent for the ratable benefit of the MEIP Banks (2) 4.14 Security Agreement, dated as of June 14, 1994, by and between LMIC and the MEIP Agent (2) 4.15 Note Agreement, dated for reference September 1, 1993, by and between Loewen and LGII re 9.62% Senior Guaranteed Notes, Series D, due September 11, 2003, issued by Loewen ("Series D Notes"), as amended on June 10, 1994 (2) II-2 Exhibit Number Description 4.16 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed Notes, Series E, due February 25, 2004, issued by LGII ("Series E Notes"), dated for reference February 1, 1994 (2) 4.17 Guaranty Agreement by Loewen re Series E Notes, dated for reference February 1, 1994 (2) 4.18 Guaranty Agreement by LGII re Series D Notes, dated for reference April 1, 1993 (2) 4.19 Note Agreement by Loewen and LGII re 9.70% Senior Guaranteed Notes, Series A, due November 1, 1998, issued by LGII ("Series A Notes"), 9.93% Senior Guaranteed Notes, Series B, due November 1, 2001, issued by LGII ("Series B Notes"), and 9.70% Senior Guaranteed Notes, Series C, due November 1, 1998, issued Loewen ("Series C Notes"), dated for reference October 1, 1991 (2) 4.20 Guaranty Agreement by Loewen re Series A Notes and Series B Notes, dated for reference October 1, 1991 (2) 4.21 Guaranty Agreement by LGII re Series C Notes, dated for reference October 1, 1991 (2) 4.22 Form of Senior Guarantee of the Notes (included in Exhibit 4.1) 4.23 Form of Global Outstanding Note (included in Exhibit 4.1) 4.24 Form of Physical Outstanding Note (included in Exhibit 4.1) 4.25 Form of Global Exchange Note** 4.26 Form of Physical Exchange Note** 4.27 Credit Agreement, dated as of May 15, 1996, among LGII, as borrower, Loewen, as a guarantor, the lenders named therein, as the lenders, Goldman, Sachs & Co., as the documentation agent and Bank of Montreal, as issuer, swingline lender and agent 4.28 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers Trust Company, as trustee, TLGI, LGII and various other pledgers 4.29 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference October 1, 1991, among Loewen, LGII and institutions named therein, re Series A Notes, Series B Notes and Series C Notes 4.30 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference September 1, 1993, among Loewen, LGII and institutions named therein, re Series D Notes 4.31 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference February 1, 1994, among Loewen, LGII and Teachers Insurance and Annuity Association of America, re Series E Notes 4.32 Loewen and LGII hereby agree to furnish to the Commission, upon request, a copy of the instruments which define the rights of holders of long-term debt of the Company. None of such instruments not included as exhibits herein collectively represents long-term debt in excess of 10% of the consolidated total assets of the Company. 5 OPINIONS RE LEGALITY 5.1 Opinion of Thelen, Marrin, Johnson & Bridges as to the legality of the Exchange Notes** 5.2 Opinion of Russell & DuMoulin as to the legality of the Guarantees with respect to the Exchange Notes** II-3 Exhibit Number Description 8 OPINIONS AS TO TAX MATTERS 8.1 Opinion of Thelen, Marrin, Johnson & Bridges as to U.S. federal tax matters** 8.2 Opinion of Russell & DuMoulin as to Canadian federal tax matters** 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (4) 12 STATEMENT RE COMPUTATION OF RATIOS 12.1 Statement re Computation of Earnings to Fixed Charges Ratio (Canadian GAAP) 12.2 Statement re Computation of Earnings to Fixed Charges Ratio (U.S. GAAP) 23 CONSENTS OF EXPERTS AND COUNSEL 23.1 Consent of Thelen, Marrin, Johnson & Bridges (included in Exhibits 5.1 and 8.1)** 23.2 Consent of Russell & DuMoulin (included in Exhibits 5.2 and 8.2)** 23.3 Consent of KPMG Peat Marwick Thorne 23.4 Consent of Price Waterhouse LLP** 23.5 Consent of Richter, Usher & Vineberg** 23.6 Consent of Altschuler, Melvion and Glasser LLP** 23.7 Consent of Keith J. Schulte Accountancy Corporation** 23.8 Consent of Hirsch, Oelbaum, Bram & Hanover** 23.9 Consent of The Dun & Bradstreet Corporation* 23.10 Consent of KPMG Peat Marwick LLP** 24 POWERS OF ATTORNEY 24.1 Loewen Group International, Inc. Powers of Attorney* 24.2 The Loewen Group Inc. Powers of Attorney* 25 STATEMENT OF ELIGIBILITY OF TRUSTEE* 99 ADDITIONAL EXHIBITS 99.1 Form of Transmittal Letter 99.2 Form of Notice of Guaranteed Delivery - -------- *Previously filed **To be filed by amendment (1) Incorporated by reference from the combined Form F-9/F-3 Registration Statements filed by Loewen and LGII, respectively, (Nos. 33-81032 and 33- 81034) with the Commission on July 1, 1994, as amended on July 11, 1994, July 22, 1994 and August 2, 1994 (2) Incorporated by reference from Loewen's Annual Report on Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (3) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, filed on May 11, 1995 (4) Incorporated by reference from Loewen's Annual Report on Form 10-K for the year ended December 31, 1995, filed on March 28, 1996 (b) Financial Statement Schedules None. II-4 ITEM 22. UNDERTAKINGS (a) Undertakings required by Item 512 of Regulation S-K (a) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Loewen hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of Loewen's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the registrants certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Burnaby, Province of British Columbia, on this 19th day of June, 1996. Loewen Group International, Inc., a Delaware corporation By: /s/ Peter S. Hyndman --------------------------------- Name: Peter S. Hyndman ------------------------------- Title: Vice-President, Law ------------------------------- The Loewen Group Inc., a corporation under the laws of British Columbia By: /s/ Peter S. Hyndman --------------------------------- Name: Peter S. Hyndman ------------------------------- Title: Vice-President, Law ------------------------------- II-6 LOEWEN GROUP INTERNATIONAL, INC. SIGNATURES Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the date indicated. June 19, 1996 /s/ Raymond L. Loewen - ------------ -------------------------------------------- Date Raymond L. Loewen Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) June 19, 1996 /s/ Timothy R. Hogenkamp* - ------------ -------------------------------------------- Date Timothy R. Hogenkamp President and Chief Operating Officer and Director (Principal Executive Officer) June 19, 1996 /s/ A.M. Bruce Watson* - ------------ -------------------------------------------- Date A.M. Bruce Watson Executive Vice-President and Director (Principal Financial Officer) June 19, 1996 /s/ Peter W. Roberts* - ------------ -------------------------------------------- Date Peter W. Roberts Vice-President, Financial Information Services and Corporate Controller (Principal Accounting Officer) June 19, 1996 /s/ George M. Amato* - ------------ -------------------------------------------- Date George M. Amato Director June 19, 1996 /s/ Gordon S. Bigelow* - ------------ -------------------------------------------- Date Gordon S. Bigelow Director June 19, 1996 /s/ J.C. Carothers, Jr.* - ------------ -------------------------------------------- Date J.C. Carothers, Jr. Director - ------------ -------------------------------------------- Date H. Steven Childress Director II-7 June 19, 1996 /s/ Bruce E. Earthman* - ------------ -------------------------------------------- Date Bruce E. Earthman Director June 19, 1996 /s/ Edward J. Fitzgerald* - ------------ -------------------------------------------- Date Edward J. Fitzgerald Director June 19, 1996 /s/ Honorine T. Flanagan* - ------------ -------------------------------------------- Date Honorine T. Flanagan Director June 19, 1996 /s/ Thomas F. Glodek* - ------------ -------------------------------------------- Date Thomas F. Glodek Director June 19, 1996 /s/ Earl A. Grollman* - ------------ -------------------------------------------- Date Earl A. Grollman Director June 19, 1996 /s/ Mary M. Howard* - ------------ -------------------------------------------- Date Mary M. Howard Director June 19, 1996 /s/ Peter S. Hyndman* - ------------ -------------------------------------------- Date Peter S. Hyndman Director June 19, 1996 /s/ Albert S. Lineberry, Jr.* - ------------ -------------------------------------------- Date Albert S. Lineberry, Jr. Director June 19, 1996 /s/ Michael L. Loudon* - ------------ -------------------------------------------- Date Michael L. Loudon Director II-8 June 19, 1996 /s/ John E. Malletta, Sr.* - ------------ -------------------------------------------- Date John E. Malletta, Sr. Director June 19, 1996 /s/ Hoyt Mayes* - ------------ -------------------------------------------- Date Hoyt Mayes Director June 19, 1996 /s/ Lawrence Miller* - ------------ -------------------------------------------- Date Lawrence Miller Director June 19, 1996 /s/ J. David Mullins* - ------------ -------------------------------------------- Date J. David Mullins Director June 19, 1996 /s/ David F. Riemann* - ------------ -------------------------------------------- Date David F. Riemann Director June 19, 1996 /s/ Robert D. Russell* - ------------ -------------------------------------------- Date Robert D. Russell Director June 19, 1996 /s/ Michael L. Schweer* - ------------ -------------------------------------------- Date Michael L. Schweer Director June 19, 1996 /s/ Bill Seale* - ------------ -------------------------------------------- Date Bill Seale Director June 19, 1996 /s/ William R. Shane* - ------------ -------------------------------------------- Date William R. Shane Director II-9 June 19, 1996 /s/ David J. Shipper* - ------------- --------------------------------------------- Date David J. Shipper Director June 19, 1996 /s/ Sandra C. Strong* - ------------- --------------------------------------------- Date Sandra C. Strong Director June 19, 1996 /s/ Robert L. Studley* - ------------- --------------------------------------------- Date Robert L. Studley Director June 19, 1996 /s/ Paul Wagler* - ------------- --------------------------------------------- Date Paul Wagler Director June 19, 1996 /s/ Robert A. Weinstein* - ------------- --------------------------------------------- Date Robert A. Weinstein Director - ------------- --------------------------------------------- Date Robert O. Wienke Director June 19, 1996 /s/ John R. Wright, Sr.* - ------------- --------------------------------------------- Date John R. Wright, Sr. Director *By: /s/ Raymond L. Loewen ------------------------------- Raymond L. Loewen Attorney-in-fact II-10 THE LOEWEN GROUP INC. SIGNATURES Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the date indicated. June 19, 1996 /s/ Raymond L. Loewen - ------------ -------------------------------------------- Date Raymond L. Loewen Chairman of the Board and Chief Executive Officer and Director (Principal Executive Officer) June 19, 1996 /s/ Timothy R. Hogenkamp* - ------------ -------------------------------------------- Date Timothy R. Hogenkamp President and Chief Operating Officer and Director (Principal Executive Officer) June 19, 1996 /s/ A.M. Bruce Watson* - ------------ -------------------------------------------- Date A.M. Bruce Watson Executive Vice-President and Director (Principal Financial Officer) June 19, 1996 /s/ Peter W. Roberts* - ------------ -------------------------------------------- Date Peter W. Roberts Vice-President, Financial Information Services and Corporate Controller (Principal Accounting Officer) June 19, 1996 /s/ Kenneth S. Bagnell* - ------------ -------------------------------------------- Date Kenneth S. Bagnell Director June 19, 1996 /s/ The Honorable J. Carter Beese, Jr.* - ------------ -------------------------------------------- Date The Honorable J. Carter Beese, Jr. Director June 19, 1996 /s/ Earl A. Grollman* - ------------ -------------------------------------------- Date Earl A. Grollman Director II-11 June 19, 1996 /s/ Harold E. Hughes* - ------------- -------------------------------------------- Date Harold E. Hughes Director June 19, 1996 /s/ Peter S. Hyndman* - ------------- -------------------------------------------- Date Peter S. Hyndman Director June 19, 1996 /s/ Albert S. Lineberry, Sr.* - ------------- -------------------------------------------- Date Albert S. Lineberry, Sr. Director June 19, 1996 /s/ Charles B. Loewen* - ------------- -------------------------------------------- Date Charles B. Loewen Director June 19, 1996 /s/ Robert B. Lundgren* - ------------- -------------------------------------------- Date Robert B. Lundgren Director June 19, 1996 /s/ James D. McLennan* - ------------- -------------------------------------------- Date James D. McLennan Director June 19, 1996 /s/ Ernest G. Penner* - ------------- -------------------------------------------- Date Ernest G. Penner Director /s/ The Honourable John N. Turner, June 19, 1996 P.C., C.C., Q.C.* - ------------- -------------------------------------------- Date The Right Honourable John N. Turner, P.C., C.C., Q.C. Director June 19, 1996 /s/ Paul Wagler* - ------------- -------------------------------------------- Date Paul Wagler Director *By: /s/ Raymond L. Loewen ------------------------------- Raymond L. Loewen Attorney-in-fact II-12 AUTHORIZED REPRESENTATIVE IN THE UNITED STATES The undersigned is Loewen's authorized representative in the United States. The undersigned hereby appoints Raymond L. Loewen, Peter S. Hyndman and Paul Wagler, and each of them severally, acting alone and without the other, his true and lawful attorney-in-fact with authority to execute in the name of such person, and to file with the Securities and Exchange Commission, together with any exhibits thereto and other documents therewith, any and all amendments (including without limitation post-effective amendments) to this Registration Statement necessary or advisable to enable the registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, which amendments may make such other changes in the Registration Statement as the aforesaid attorney-in-fact deems appropriate. June 19, 1996 /s/ Timothy R. Hogenkamp - ------------ -------------------------------------------- Date Timothy R. Hogenkamp EXHIBIT INDEX Exhibit Number Description 4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY-HOLDERS, INCLUDING INDENTURES 4.1 Indenture, dated as of March 20, 1996, by and between LGII, Loewen, as guarantor of the obligations of LGII under the Indenture, and Fleet National Bank of Connecticut, as Trustee, with respect to 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and 8 1/4% Series 2 Senior Guaranteed Notes due 2003 (4) 4.2 Purchase Agreement, dated as of March 13, 1996, by and between LGII, Loewen and the Initial Purchasers* 4.3 Receipt Agreement, dated as of January 3, 1996, for the Cumulative Redeemable Convertible First Preferred Shares Series C of Loewen (4) 4.4 Shareholder Protection Rights Plan, dated as of April 20, 1990, as amended on May 24, 1990 and April 7, 1994 and reconfirmed on May 17, 1995 (2) 4.5 Amended and Restated Multicurrency Credit Agreement, dated as of May 11, 1995, by and between LGII, as borrower, Loewen, as guarantor, the banks named therein as lenders and The First National Bank of Chicago, as agent for the banks named therein as lenders (3) 4.6 Multicurrency Credit Agreement, dated as of May 11, 1995, by and between LGII, as borrower, Loewen, as guarantor, the banks named therein as lenders and The First National Bank of Chicago, as agent for the banks named therein as lenders (3) 4.7 Zero Coupon Loan Agreement, dated as of November 1, 1994, by and between WLSP Investment Partners I, Neweol Finance B.V., Electrolux Holdings B.V., Man Producten Rotterdam B.V., Adinvest A.G., and Wachovia Bank of Georgia, N.A. (2) 4.8 MIPS Guarantee Agreement, dated August 15, 1994 (1) 4.9 Indenture, dated as of August 15, 1994, by and between LGII, as issuer, Loewen, as guarantor, and State Street Bank and Trust Company, as trustee with respect to 9.45% Junior Subordinated Debentures, Series A, due 2024, issued by LGII and guaranteed by Loewen (1) 4.10 Exchange Acknowledgment by Loewen, with respect to the 1994 Exchangeable Floating Rate Debentures due July 15, 2001 issued by LGII, dated June 15, 1994 (2) 4.11 1994 MEIP Credit Agreement, dated as of June 14, 1994, by and between Loewen Management Investment Corporation, in its capacity as agent for LGII ("LMIC"), Loewen and the banks listed therein (the "MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for the MEIP Banks ("MEIP Agent") (2) 4.12 Guaranty dated as of June 14, 1994 by Loewen in favor of the MEIP Agent for the ratable benefit of the MEIP Banks (2) 4.13 Guaranty dated as of June 14, 1994 by LGII in favor of the MEIP Agent for the ratable benefit of the MEIP Banks (2) Exhibit Number Description 4.14 Security Agreement, dated as of June 14, 1994, by and between LMIC and the MEIP Agent (2) 4.15 Note Agreement, dated for reference September 1, 1993, by and between Loewen and LGII re 9.62% Senior Guaranteed Notes, Series D, due September 11, 2003, issued by Loewen ("Series D Notes"), as amended on June 10, 1994 (2) 4.16 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed Notes, Series E, due February 25, 2004, issued by LGII ("Series E Notes"), dated for reference February 1, 1994 (2) 4.17 Guaranty Agreement by Loewen re Series E Notes, dated for reference February 1, 1994 (2) 4.18 Guaranty Agreement by LGII re Series D Notes, dated for reference April 1, 1993 (2) 4.19 Note Agreement by Loewen and LGII re 9.70% Senior Guaranteed Notes, Series A, due November 1, 1998, issued by LGII ("Series A Notes"), 9.93% Senior Guaranteed Notes, Series B, due November 1, 2001, issued by LGII ("Series B Notes"), and 9.70% Senior Guaranteed Notes, Series C, due November 1, 1998, issued Loewen ("Series C Notes"), dated for reference October 1, 1991 (2) 4.20 Guaranty Agreement by Loewen re Series A Notes and Series B Notes, dated for reference October 1, 1991 (2) 4.21 Guaranty Agreement by LGII re Series C Notes, dated for reference October 1, 1991 (2) 4.22 Form of Senior Guarantee of the Notes (included in Exhibit 4.1) 4.23 Form of Global Outstanding Note (included in Exhibit 4.1) 4.24 Form of Physical Outstanding Note (included in Exhibit 4.1) 4.25 Form of Global Exchange Note** 4.26 Form of Physical Exchange Note** 4.27 Credit Agreement, dated as of May 15, 1996, among LGII, as borrower, Loewen, as a guarantor, the lenders named therein, as the lenders, Goldman, Sachs & Co., as the documentation agent and Bank of Montreal, as issuer, swingline lender and agent 4.28 Collateral Trust Agreement, dated as of May 15, 1996, among Bankers Trust Company, as trustee, TLGI, LGII and various other pledgers 4.29 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference October 1, 1991, among Loewen, LGII and institutions named therein, re Series A Notes, Series B Notes and Series C Notes 4.30 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference September 1, 1993, among Loewen, LGII and institutions named therein, re Series D Notes Exhibit Number Description 4.31 Second Amendment, dated for reference May 15, 1996, to Note Agreements, dated for reference February 1, 1994, among Loewen, LGII and Teachers Insurance and Annuity Association of America, re Series E Notes 4.32 Loewen and LGII hereby agree to furnish to the Commission, upon request, a copy of the instruments which define the rights of holders of long-term debt of the Company. None of such instruments not included as exhibits herein collectively represents long-term debt in excess of 10% of the consolidated total assets of the Company. 5 OPINIONS RE LEGALITY 5.1 Opinion of Thelen, Marrin, Johnson & Bridges as to the legality of the Exchange Notes** 5.2 Opinion of Russell & DuMoulin as to the legality of the Guarantees with respect to the Exchange Notes** 8 OPINION OF THELEN, MARRIN, JOHNSON & BRIDGES AS TO TAX MATTERS 12 STATEMENT RE COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO (4) 23.1 Consent of Thelen, Marrin, Johnson & Bridges (included in Exhibits 5.1 and 8)** 23.2 Consent of Russell & DuMoulin (included in Exhibit 5.2)** 23.3 Consent of KPMG Peat Marwick Thorne 23.4 Consent of Price Waterhouse LLP** 23.5 Consent of Richter, Usher & Vineberg** 23.6 Consent of Altschuler, Melvion and Glasser LLP** 23.7 Consent of Keith J. Schulte Accountancy Corporation** 23.8 Consent of Hirsch, Oelbaum, Bram & Hanover** 23.9 Consent of The Dun & Bradstreet Corporation* 23.10 Consent of KPMG Peat Marwick LLP** 24 POWERS OF ATTORNEY 24.1 Loewen Group International, Inc. Powers of Attorney* 24.2 The Loewen Group Inc. Powers of Attorney* 25 STATEMENT OF ELIGIBILITY OF TRUSTEE* 99 ADDITIONAL EXHIBITS 99.1 Form of Transmittal Letter 99.2 Form of Notice of Guaranteed Delivery - -------- *Previously filed **To be filed by amendment (1) Incorporated by reference from the combined Form F-9/F-3 Registration Statements filed by Loewen and LGII, respectively, (Nos. 33-81032 and 33- 81034) with the Commission on July 1, 1994, as amended on July 11, 1994, July 22, 1994 and August 2, 1994 (2) Incorporated by reference from Loewen's Annual Report on Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (3) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, filed on May 11, 1995 (4) Incorporated by reference from Loewen's Annual Report on Form 10-K for the year ended December 31, 1995, filed on March 28, 1996 EX-4.27 2 CREDIT AGREEMENT EXHIBIT 4.27 U.S. $750,000,000 CREDIT AGREEMENT Dated as of May 15, 1996 Among LOEWEN GROUP INTERNATIONAL, INC. as the Borrower, THE LOEWEN GROUP INC. as a Guarantor, THE LENDERS NAMED HEREIN as the Lenders, GOLDMAN, SACHS & CO. as the Documentation Agent, and BANK OF MONTREAL as L/C Issuer, Swing Line Lender and Agent TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS............................................. 2 1.1. Certain Defined Terms..................................................... 2 ARTICLE II THE CREDITS............................................. 26 2.1. The Revolving Loans....................................................... 26 2.2. Repayment of the Revolving Loans.......................................... 26 2.3. Ratable Revolving Loans; Types of Advances................................ 26 2.4. Minimum Amount of Each Advance............................................ 26 2.5. Optional Prepayments of Revolving Loans................................... 27 2.6. Method of Selecting Types and Interest Periods for New Advances........... 27 2.7. Conversion and Continuation of Outstanding Advances....................... 28 2.8. Payment of Interest on Revolving Loans and Advances....................... 29 2.9. Changes in Interest Rate, Etc............................................. 29 2.10. Commitment Fee; Mandatory and Voluntary Reductions in Aggregate Commitment...................................................... 29 2.11. Rates Applicable After Default............................................ 30 2.12. Method of Payment......................................................... 31 2.13. Evidence of Debt; Telephonic Notices...................................... 31 2.14. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions..................................................... 32 2.15. Lending Installations..................................................... 32 2.16. Non-Receipt of Funds by the Agent......................................... 32 2.17. Withholding Tax Exemption; Gross Up....................................... 33 2.18. Extension of Facility Termination Date.................................... 34 2.19. Mandatory Prepayments..................................................... 35 2.20. Termination............................................................... 35 2.21. Letter of Credit Facility................................................. 36 2.21.1 Letters of Credit................................................. 36 2.21.2 Letter of Credit Participation.................................... 36 2.21.3 Reimbursement Obligation.......................................... 37 2.21.4 Cash Collateral................................................... 38 2.21.5 Letter of Credit Fees............................................. 39 2.21.6 Indemnification; Exoneration...................................... 40 2.21.7 Letter of Credit Cancellation..................................... 41 2.22. Swing Line Commitment..................................................... 41 2.23. Borrowing Procedures for Swing Line Loans................................. 42 2.24. Refunding of Swing Line Loans............................................. 42
-i- 2.25. Participations in Swing Line Loans........................................ 43 2.26. Swing Line Participation Obligations Unconditional........................ 43 2.27. Evidence of Swing Line Loans; Telephonic Notices.......................... 44 2.28. Conditions to Swing Line Loans............................................ 44 ARTICLE III CHANGE IN CIRCUMSTANCES....................................... 45 3.1. Yield Protection.......................................................... 45 3.2. Changes in Capital Adequacy Regulations................................... 46 3.3. Availability of Types of Advances......................................... 46 3.4. Funding Indemnification................................................... 46 3.5. Mitigation; Lender Statements; Survival of Indemnity...................... 47 ARTICLE IV CONDITIONS PRECEDENT......................................... 48 4.1. Initial Advance, Swing Line Loan and Letter of Credit..................... 48 4.2. Each Advance, Swing Line Loan and Letter of Credit........................ 50 ARTICLE V TLGI GUARANTY............................................ 51 5.1. The Guaranty.............................................................. 51 5.2. Guaranty Unconditional.................................................... 51 5.3. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances............................................................. 52 5.4. Waiver by TLGI............................................................ 52 5.5. Waiver of Subrogation Rights.............................................. 53 5.6. Stay of Acceleration...................................................... 53 5.7. Gross-up.................................................................. 53 ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................... 54 6. Representations and Warranties............................................ 54 6.1. Corporate Existence and Standing.......................................... 54 6.2. Authorization and Validity................................................ 54 6.3. No Conflict; Government Consent........................................... 54 6.4. Financial Statements...................................................... 55 6.5. Material Adverse Change................................................... 55 6.6. Taxes..................................................................... 55 6.7. Litigation and Contingent Liabilities..................................... 56 6.8. Subsidiaries; Pledge of Stock............................................. 56 6.9. ERISA..................................................................... 56 6.10. Accuracy of Information................................................... 57 6.11. Regulation U.............................................................. 57
-ii- 6.12. Material Agreements....................................................... 57 6.13. Compliance With Laws...................................................... 57 6.14. Ownership of Properties................................................... 57 6.15. Investment Company Act.................................................... 58 6.16. Public Utility Holding Company Act........................................ 58 6.17. Post-Retirement Benefits.................................................. 58 6.18. Negative Pledge........................................................... 58 6.19. Solvency.................................................................. 58 6.20. Debt Offering and Equity Placement........................................ 58 ARTICLE VII COVENANTS.............................................. 59 7. Covenants................................................................. 59 7.1. Financial Reporting....................................................... 59 7.2. Use of Proceeds........................................................... 62 7.3. Notices of Default, Litigation, Etc....................................... 63 7.4. Conduct of Business....................................................... 63 7.5. Taxes..................................................................... 64 7.6. Insurance................................................................. 64 7.7. Compliance with Laws...................................................... 64 7.8. Maintenance of Properties................................................. 64 7.9. Inspection................................................................ 64 7.10. Distributions............................................................. 64 7.11. Indebtedness.............................................................. 65 7.12. Merger.................................................................... 66 7.13. Sale of Assets............................................................ 66 7.14. Prepayments............................................................... 67 7.15. Affiliates................................................................ 67 7.16. Investments............................................................... 68 7.17. Negative Pledge........................................................... 70 7.18. Liens..................................................................... 70 7.19. Minimum Consolidated Net Worth............................................ 72 7.20. Minimum Consolidated Tangible Net Worth................................... 73 7.21. Maximum Consolidated Indebtedness to Consolidated Capitalization.......... 73 7.22. Interest Charges Coverage................................................. 73 7.23. Maximum Consolidated Indebtedness to Adjusted EBITDA...................... 73 7.24. Covenants Not to Compete.................................................. 73 7.25. Ownership of the Borrower................................................. 73 7.26. Acquisitions.............................................................. 73 7.27. Pledge of Stock and Grant of Security Interest in Certain Assets.......... 73 7.28. Subsidiaries.............................................................. 74 7.29. Subsidiaries' Stock....................................................... 75
-iii- ARTICLE VIII DEFAULTS............................................... 76 8. Defaults.................................................................. 76 ARTICLE IX ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............................ 79 9.1. Acceleration.............................................................. 79 9.2. Amendments................................................................ 80 9.3. Preservation of Rights.................................................... 81 ARTICLE X GENERAL PROVISIONS.......................................... 82 10.1. Survival of Representations............................................... 82 10.2. Governmental Regulation................................................... 82 10.3. Stamp Duties.............................................................. 82 10.4. Headings.................................................................. 82 10.5. Entire Agreement; Independence of Covenants............................... 82 10.6. Several Obligations; Benefits of this Agreement........................... 82 10.7. Expenses; Indemnification................................................. 82 10.8. Numbers of Documents...................................................... 84 10.9. Accounting; Currency Conversions.......................................... 84 10.10. Severability of Provisions................................................ 84 10.11. Nonliability of Lenders................................................... 85 10.12. CHOICE OF LAW............................................................. 85 10.13. CONSENT TO JURISDICTION................................................... 85 10.14. WAIVER OF JURY TRIAL...................................................... 86 10.15. Confidentiality........................................................... 86 10.16. Judgment Currency......................................................... 86 10.17. Canadian Interest Antidotes............................................... 87 10.18. Counterparts; Effectiveness............................................... 87 ARTICLE XI THE AGENT AND THE DOCUMENTATION AGENT................................ 88 11.1. Appointment............................................................... 88 11.2. Powers.................................................................... 88 11.3. General Immunity.......................................................... 88 11.4. No Responsibility for Revolving Loans, Swing Line Loans, Recitals, Etc....................................................................... 88 11.5. Action on Instructions of Lenders......................................... 88 11.6. Employment of Agents and Counsel.......................................... 89 11.7. Reliance on Documents; Counsel............................................ 89 11.8. Agent's Reimbursement and Indemnification................................. 89 11.9. Rights as a Lender........................................................ 89
-iv- 11.10. Lenders' Credit Decisions................................................. 90 11.11. Successor Agent........................................................... 90 11.12. Agent's Fee............................................................... 90 11.13. Documentation Agent....................................................... 91 ARTICLE XII SETOFF; RATABLE PAYMENTS....................................... 91 12.1. Setoff.................................................................... 91 12.2. Ratable Payments.......................................................... 91 ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.......................... 91 13.1. Successors and Assigns.................................................... 91 13.2. Participations............................................................ 92 13.2.1 Permitted Participations; Effect.................................. 92 13.2.2 Voting Rights..................................................... 93 13.2.3 Setoff............................................................ 93 13.3. Assignments............................................................... 93 13.3.1 Permitted Assignments............................................. 93 13.3.2 Effect; Effective Date of Assignments............................. 94 13.4. Dissemination of Information.............................................. 95 13.5. Tax Treatment............................................................. 95 ARTICLE XIV NOTICES............................................... 96 14.1. Giving Notice............................................................. 96 14.2. Change of Address......................................................... 96 ARTICLE XV COLLATERAL TRUST AGREEMENT...................................... 96 15.1. Appointment of Secured Party Representative............................... 96 15.2. Appointment of Enforcement Representatives................................ 96 15.3. Actions of Lenders........................................................ 96
-v- SCHEDULE 1 - Disclosure Schedule SCHEDULE 2 - Applicable Margins and Applicable Commitment and Letter of Credit Fee Rates SCHEDULE 3 - Senior Obligations SCHEDULE 4 - Pledgor Subsidiary Opinions SCHEDULE 5 - Commitments of the Lenders SCHEDULE 6 - Certain Pledged Shares Subject to Transfer Restrictions EXHIBIT A - Form of Revolving Note EXHIBIT B - Required Opinions EXHIBIT C - Form of Compliance Certificate EXHIBIT D - Form of Assignment Agreement EXHIBIT E - Form of Revolving Loan/Swing Line Loan/Credit Related Money Transfer Instruction EXHIBIT F - Form of Revolving Loan Borrowing Notice EXHIBIT G - Form of Prepayment Notice EXHIBIT H - Form of Extension Request EXHIBIT I - Form of Conversion/Continuation Notice EXHIBIT J - Form of Collateral Trust Agreement EXHIBIT K - Form of Approved Sale Certificate EXHIBIT L - Form of Swing Line Loan Borrowing Notice -vi- CREDIT AGREEMENT ---------------- THIS CREDIT AGREEMENT, dated as of May 15, 1996, is among LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation, as the Borrower, THE LOEWEN GROUP INC., a corporation organized under the laws of the Province of British Columbia, Canada, as a Guarantor, THE LENDERS NAMED HEREIN, as the initial Lenders, GOLDMAN, SACHS & CO., as the Documentation Agent, and BANK OF MONTREAL, as the L/C Issuer and the Swing Line Lender and as the Agent for the Lenders. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower desires to obtain Commitments from the Lenders, pursuant to which (i) Revolving Loans and Swing Line Loans will be made to the Borrower, in a maximum aggregate principal amount at any one time outstanding not to exceed the excess of the Aggregate Commitment over the L/C Obligations at ---- such time; and (ii) Letters of Credit will be issued and renewed for the account of the Borrower, in a maximum aggregate Stated Amount at any one time outstanding not to exceed the excess of the L/C Commitment Amount over the ---- aggregate L/C Obligations at such time, in each case from time to time prior to the Facility Termination Date; and WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to extend such Commitments, to make such Revolving Loans to the Borrower, to make (or participate in, as the case may be) such Swing Line Loans to the Borrower, and to issue or renew (or participate in, as the case may be) such Letters of Credit for the account of the Borrower; and WHEREAS, the proceeds of such Revolving Loans and Swing Line Loans will be used: (a) to make payment in full of all Indebtedness identified on Annex I of Schedule 1 hereto under the heading "Indebtedness to be ------- ---------- Paid"; (b) for general corporate purposes and working capital purposes of the Borrower and its Subsidiaries; and (c) to finance non-contested acquisitions made by the Borrower or its Subsidiaries under the terms and conditions hereinafter set forth; and WHEREAS, the Letters of Credit will be issued to support (i) certain financial obligations of TLGI, the Borrower or its Subsidiaries and (ii) certain other obligations of TLGI, the Borrower or its Subsidiaries on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1. Certain Defined Terms. As used in this Agreement the following --------------------- terms shall have the following meanings, such meanings being equally applicable to both the singular and plural forms of the terms defined: "Acquisition" means any transaction, or any series of related ----------- transactions, by which TLGI or any of its Subsidiaries (a) acquires any going business or all or substantially all of the assets of any firm, corporation, limited liability company, partnership or other Person, or (as applicable) any operation or division thereof which constitutes a going business, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership, membership interests of a limited liability company, or other ownership interests of any Person. "Additional Consent Period" has the meaning specified in Section 2.18. ------------------------- ------------ "Adjusted EBITDA" shall mean at any time for the four-quarter period --------------- then most recently ended the sum of (a) EBITDA of TLGI and the Borrower and the other Subsidiaries for such four-quarter period determined on a consolidated basis, plus (b) EBITDA for such four-quarter period of all Persons acquired by ---- TLGI, the Borrower or the other Subsidiaries during the six-month period ending on the last day of such four-quarter period (but only to the extent the Acquisitions of such Persons constituted Permitted Acquisitions), less (c) all ---- amounts included in the foregoing clause (b) to the extent such amounts are ---------- included in the foregoing clause (a); provided that EBITDA of any such acquired ---------- Person shall be determined on the basis of actual EBITDA for such acquired Person as set forth in the financial statements of such acquired Person, which financial statements shall be (x) audited for the portion of such four-quarter period which falls within the most recently ended fiscal year of such acquired Person ended prior to the date on which such Person became a Subsidiary of TLGI, the Borrower or another Subsidiary and unaudited for the portion of such four- quarter period which falls after the end of the most recently ended fiscal year of such acquired Person ended prior to the date on which such Person became a Subsidiary of TLGI, the Borrower or another Subsidiary if the total consideration payable in connection with such Acquisition is in excess of $25,000,000, and (y) unaudited for such 2 four-quarter period if the total consideration payable in connection with such Acquisition is $25,000,000 or less. "Advance" means a borrowing consisting of simultaneous Revolving Loans ------- of the same Type made to the Borrower by each of the Lenders pursuant to Section ------- 2.1, for, in the case of Fixed Rate Advances, the same Interest Period. - --- "Affiliate" of any Person means any other Person directly or --------- indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank of Montreal in its capacity as agent for the ----- Lenders pursuant to Article XI, and not in its capacity as the Swing Line ---------- Lender, the L/C Issuer or a Lender, and any successor Agent appointed pursuant to Article XI. ---------- "Aggregate Commitment" means the aggregate of the Commitments of all -------------------- the Lenders, as reduced from time to time pursuant to the terms hereof. "Agreement" means this Credit Agreement, as it from time to time may --------- be amended, restated, supplemented or otherwise modified in accordance with the terms hereof. "Agreement Accounting Principles" means GAAP as in effect from time to ------------------------------- time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 6.4. ----------- "Alternate Base Rate" means, for any day, a floating rate of interest ------------------- per annum equal to the higher of (a) the Base Rate for such day and (b) the sum of the Federal Funds Effective Rate for such day plus 0.50% per annum. Changes in the rate of interest on that portion of any Revolving Loans maintained as Floating Rate Advances and on all Swing Line Loans (and in the rate of interest on any other Obligations from time to time bearing interest at a rate determined by reference to the Alternate Base Rate) will take effect simultaneously with each change in the Alternate Base Rate. "Applicable Commitment Fee Rate" means a per annum rate determined ------------------------------ from time to time by reference to TLGI's senior unsecured (except, if applicable, pursuant to the Collateral Trust Agreement) long-term debt rating as specified on Schedule 2 hereto. Any change in the Applicable Commitment Fee ---------- Rate resulting from a change in TLGI's debt ratings will take effect as of the date of the debt ratings change. 3 "Applicable Letter of Credit Fee Rate" means a per annum rate ------------------------------------ determined from time to time by reference to TLGI's senior unsecured (except, if applicable, pursuant to the Collateral Trust Agreement) long-term debt rating as specified on Schedule 2 hereto. Any change in the Applicable Letter of Credit ---------- Fee Rate resulting from a change in TLGI's debt ratings will take effect as of the date of the debt ratings change. "Applicable Margin" means a per annum rate determined from time to ----------------- time by reference to TLGI's senior unsecured (except, if applicable, pursuant to the Collateral Trust Agreement) long-term debt rating as specified on Schedule 2 ---------- hereto. Any change in the Applicable Margin resulting from a change in TLGI's debt ratings will take effect as of the date of the debt ratings change. "Approved Sale" means any sale of Property pledged to the Collateral ------------- Agent under the terms of the Collateral Trust Agreement (i) which is expressly permitted by the terms of Section 7.13 and with respect to which TLGI and the ------------ Borrower shall have delivered to the Agent prior to consummation of such sale a certificate from an Authorized Officer in the form of Exhibit K hereto --------- certifying that both immediately before and after giving effect to such sale, no Default or Unmatured Default shall have occurred and be continuing, or (ii) which is otherwise approved by the Required Lenders. "Article" means a numbered article of this Agreement, unless another ------- document is specifically referenced. "Assessment Rate" means, for any CD Interest Period, the assessment --------------- rate per annum (rounded upwards to the next higher multiple of 1/100 of 1% if the rate is not such a multiple) payable to the Federal Deposit Insurance Corporation (or any successor) by a member of the Bank Insurance Fund which is classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. (S)327.4(a) (or any successor provision) for the insurance of time deposits at the offices of such institution in the United States, as estimated by the Agent on the first day of such Interest Period. "Authorized Officer" means (a) with respect to TLGI, any of the ------------------ President, Executive Vice President, Senior Vice President or Treasurer of TLGI, or any Person designated by any two of the foregoing, acting singly and (b) with respect to the Borrower, any of the President, Executive Vice President, Senior Vice President or Treasurer of the Borrower, or any Person designated by any two of the foregoing, acting singly. "Bank of Montreal" means Bank of Montreal in its individual capacity, ---------------- and its successors. "Base Rate" means, at any time, the floating rate per annum then most --------- recently announced by Bank of Montreal in Chicago, Illinois as the reference rate of interest 4 it will use to determine rates of interest for loans in Dollars in the United States and referred to by it as its "U.S. base rate." The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Bank of Montreal in connection with extensions of credit. "Borrower" means Loewen Group International, Inc., a Delaware -------- corporation, and its successors and assigns to the extent permitted under the terms of this Agreement. "Business Day" means (a) with respect to any borrowing, payment or ------------ rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday or other day on which banks are authorized or required to be closed) on which banks generally are open in Chicago, New York and London for the conduct of substantially all of their commercial lending activities and (b) for all other purposes, a day (other than a Saturday or Sunday or other day on which banks are authorized or required to be closed) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities. "Canadian Dollars" and "C$" means the lawful money of Canada. ---------------- -- "Canadian GAAP" means, at any time, generally accepted accounting ------------- principles in Canada at such time. "Canadian Plan" means a pension plan provided by TLGI or any other ------------- Subsidiary incorporated under the laws of Canada or any Province of Canada. "Capitalized Lease" of a Person means any lease of Property by such ----------------- Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the ----------------------------- obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CD Interest Period" means, with respect to a Fixed CD Rate Advance, a ------------------ period of 30, 60, 90 or 180 days commencing on a Business Day selected by the Borrower pursuant to this Agreement. If such CD Interest Period would end on a day which is not a Business Day, such CD Interest Period shall end on the next succeeding Business Day. "Change of Control" means an event which shall be deemed to have ----------------- occurred if (a) the Borrower shall at any time cease to be a Wholly-Owned Subsidiary of TLGI, or (b) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) shall either (x) acquire beneficial ownership of more than 50% of any outstanding class of common stock of TLGI having ordinary voting power in the election of directors of TLGI or (y) obtain the power (whether or not exercised) to 5 elect a majority of TLGI's directors, or (c) during any period of 12 consecutive calendar months, individuals (i) who were directors of TLGI on the first day of such period, or (ii) whose election or nomination for election to the board of directors of TLGI was recommended or approved by at least a majority of the directors then still in office who were directors of TLGI on the first day of such period, or whose election or nomination for election was so approved, shall cease to constitute a majority of the board of directors of TLGI. "Chief Financial Officer" means, at any time, the Person who reports ----------------------- to the board of directors of TLGI on the financial affairs of TLGI and the Subsidiaries. "Class B Invested Amount" has the meaning specified in the Pooling and ----------------------- Servicing Agreement dated as of November 15, 1994, among The First National Bank of Atlanta, d/b/a Wachovia Bank Card Services, as seller, Wachovia Bank of Georgia, N.A., as servicer and Banc One Columbus, N.A., as trustee. "Code" means the Internal Revenue Code of 1986, as amended, reformed ---- or otherwise modified from time to time. "Collateral Agent" means Bankers Trust Company and its successors in ---------------- the capacity of collateral agent under the terms of the Collateral Trust Agreement. "Collateral Trust Agreement" means that certain Collateral Trust -------------------------- Agreement, substantially in the form of Exhibit J hereto, dated as of the date --------- hereof and executed by TLGI, the Borrower, all Pledgor Subsidiaries, and the Collateral Agent, as such Collateral Trust Agreement may be amended or modified and is in effect from time to time. "Commitment" means, for each Lender, the obligation of such Lender to ---------- make Revolving Loans, to purchase participations in Swing Line Loans and to purchase participations in Letters of Credit not exceeding the amount set forth opposite its name on Schedule 5 hereto or as set forth in any Notice of ---------- Assignment relating to any assignment that has become effective pursuant to Section 13.3.2, as such amount may be modified from time to time pursuant to the - -------------- terms hereof. "Condemnation" has the meaning specified in Section 8.8. ------------ ----------- "Consolidated Capitalization" means at any time of determination, the --------------------------- sum of (a) the Consolidated Indebtedness of TLGI at such time, and (b) the Consolidated Net Worth of TLGI at such time. "Consolidated Distributable Amount" means, at any time of --------------------------------- determination, the sum of, 6 (a) $10,000,000, plus (b) 50% of Consolidated Net Income (or if such Consolidated Net Income is a deficit figure, then minus 100% of such deficit) determined on a cumulative basis for the period commencing on January 1, 1996, and ending on the date of determination, plus (c) 33 1/3% of the aggregate amount of the net cash proceeds received by TLGI and the Borrower and their respective Subsidiaries from the issuance or sale on or after January 1, 1996 (other than sales or issuances to TLGI or the Borrower or any of their respective Subsidiaries, and other than the Equity Placement and the issuance, at any time, of preferred stock by TLGI in exchange for the First Preferred Series C Receipts) of the capital stock of TLGI or Indebtedness of TLGI, the Borrower or any of their respective Subsidiaries which has been converted into capital stock of TLGI. "Consolidated Fixed Charges" means, for any period, without -------------------------- duplication, the sum of the amounts for such period of (i) Consolidated Interest Charges and (ii) the product of (a) the aggregate amount of dividends and other distributions paid or accrued during such period in respect of (1) preferred stock of TLGI, the Borrower or any other Subsidiary (but exclusive of preferred stock issued to TLGI or an Affiliate of TLGI) and (2) capital stock of TLGI which is or may be redeemable or convertible into debt prior to the Facility Termination Date and (b) for each such dividend or distribution, a multiplier, the numerator of which is one and the denominator of which is one minus the then current combined federal, provincial, state and local statutory tax rate of TLGI and its Subsidiaries determined on a consolidated basis, such multiplier to be expressed as a decimal, provided, however, that the multiplier in clause (ii)(b) -------- ------- -------------- shall be deemed to be one if such dividend or other distribution described in the preceding clause (ii)(a) is fully tax deductible. -------------- "Consolidated Fixed Charges Coverage Ratio" means, with respect to a ----------------------------------------- Transaction Date (hereinafter defined), the ratio of (x) EBITDA for the full fiscal quarter immediately preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed ---------------- Charge Coverage Ratio (such full fiscal quarter period being referred to herein as the "Prior Quarter") to (y) the amount of Consolidated Fixed Charges for the ------------- Prior Quarter. In addition to and without limitation of the foregoing, for purposes of this definition, "EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such --------- calculation to, without duplication, the incurrence of any Indebtedness of TLGI or any of its Subsidiaries (and the application of the net proceeds thereof) during the period commencing on the first day of the Prior Quarter to and including the Transaction Date (the "Reference Period"), including, without ---------------- limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation (and the application of the net proceeds thereof), as if such incurrence (and application) occurred on the first day of the Reference Period. Furthermore, in 7 calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of "Consolidated Fixed Charges Coverage Ratio", (i) interest on outstanding Indebtedness determined on a fluctuating basis as at the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to --- ----- the rate of interest on such Indebtedness in effect on the Transaction Date; and (ii) interest on any Indebtedness which is actually incurred on the Transaction Date and which may optionally be determined at an interest rate based upon a factor of a prime, base, reference or similar rate, a eurocurrency interbank offered rate, or other rates, shall be deemed to have been in effect during the Reference Period at the interest rate in effect on the Transaction Date. If TLGI or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, this definition shall give effect to the incurrence of such guaranteed Indebtedness as if TLGI or such Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Indebtedness" means, at any time of determination, ------------------------- without duplication, all Indebtedness of TLGI, the Borrower and the Subsidiaries of TLGI and the Borrower at such time determined on a consolidated basis in accordance with GAAP (to the extent GAAP is applicable thereto). "Consolidated Interest Charges" for any period shall mean on a ----------------------------- consolidated basis all interest (including the interest component of Capitalized Lease Obligations and Synthetic Lease Obligations), and all amortization of debt discount and expense on all Indebtedness of TLGI and the Borrower and their Subsidiaries for such period. "Consolidated Net Income" for any period shall mean the gross revenues ----------------------- of TLGI and the Borrower and the other Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses on the sale or other disposition of Investments or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Subsidiary accrued prior to the date it became a Subsidiary; (d) net earnings and losses of any corporation (other than a Subsidiary) substantially all the assets of which have been acquired in any manner by TLGI or any Subsidiary, realized by such corporation prior to the date of such acquisition; 8 (e) net earnings and losses of any corporation (other than a Subsidiary) with which TLGI or a Subsidiary shall have consolidated or which shall have merged into or amalgamated with TLGI or a Subsidiary prior to the date of such consolidation, merger or amalgamation; (f) net earnings of any business entity (other than a Subsidiary) in which TLGI or any Subsidiary has an ownership interest unless such net earnings shall have actually been received by TLGI or such Subsidiary in the form of cash distributions; (g) any portion of the net earnings of any Subsidiary which for any reason is unavailable for payment of dividends to TLGI or any other Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of the acquisition thereof over the amount invested in such Subsidiary; (j) any gain or loss arising from the acquisition of any securities of TLGI or any Subsidiary; (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period; and (l) any other unusual or extraordinary gain. "Consolidated Net Worth" means, as of the date of any determination ---------------------- thereof, the sum of the amount of the shareholders' equity of TLGI and the Borrower and the other Subsidiaries as would be shown on the consolidated balance sheet of TLGI and the Borrower and the other Subsidiaries determined on a consolidated basis in accordance with GAAP, which in any event shall include (x) the MIPS and (y) the amount of all preferred stock of TLGI and the Borrower and all Subsidiaries of TLGI and the Borrower to the extent such preferred stock is not redeemable at the option of the holder for cash or indebtedness for any reason, and which shall exclude the amount of all preferred stock of TLGI and the Borrower and all Subsidiaries of TLGI and the Borrower to the extent such preferred stock is redeemable at the option of the holder for cash or indebtedness for any reason. "Consolidated Tangible Net Worth" means, as of the date of any ------------------------------- determination thereof, as to any Person, the Consolidated Net Worth of such Person, less the sum of the value, as set forth or reflected on the most recent consolidated balance sheet of such Person and its consolidated Subsidiaries, prepared in accordance with GAAP, of: 9 (a) any surplus resulting from any write-up of assets subsequent to December 31, 1995; (b) all assets which would be treated as intangible assets for balance sheet presentation purposes under GAAP, including without limitation goodwill (whether representing the excess of cost over book value of assets acquired, or otherwise), trademarks, trade names, service marks, copyrights, patents and technologies, names and reputations, covenants not to compete, organization or developmental expenses, and unamortized debt discount and expense; (c) to the extent not included in clause (b) of this definition, any ---------- amount at which shares of capital stock of such Person and its consolidated Subsidiaries appear as an asset on the balance sheet of such Person and its consolidated Subsidiaries; (d) Revolving Loans or Advances or Swing Line Loans or proceeds of Letters of Credit provided to stockholders, directors, officers or employees of such Person or its Subsidiaries; and (e) to the extent not included in clause (b) of this definition, ---------- deferred expenses. "Contingent Obligation" of a Person means any agreement, undertaking --------------------- or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or reimbursement obligation arising pursuant to a letter of credit (including any Letter of Credit); provided, however, that -------- ------- notwithstanding the foregoing, the WLSP Contingent Obligation shall not constitute a Contingent Obligation of TLGI, the Borrower or any other Subsidiary for any purpose under this Agreement so long as the Class B Invested Amount at least equals $12,000,000. "Controlled Group" means all members of a controlled group of ---------------- corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Conversion/Continuation Notice" has the meaning specified in Section ------------------------------ ------- 2.7. - --- "Debt Offering" means the offering by the Borrower during the first ------------- calendar quarter of 1996 of not less than $200,000,000 principal amount of the Borrower's long-term debt. 10 "Default" means an event described in Article VIII. ------- ------------ "Distribution" in respect of any corporation shall mean (a) dividends ------------ or other distributions on capital stock of the corporation (except dividends or other distributions payable solely in shares of capital stock), and (b) the redemption, retirement or acquisition of such stock or of warrants, rights or other options to purchase such stock (except when solely in exchange for such stock). "Distribution Date" has the meaning specified in Section 7.10(d). ----------------- --------------- "Documentation Agent" means Goldman, Sachs & Co. ------------------- "Dollars" and "$" mean the lawful money of the United States. ------- - "Duff & Phelps" means Duff & Phelps Credit Rating Co. ------------- "Eagle" means Eagle Financial Associates, LLC, a Delaware limited ----- liability company and a Wholly-Owned Subsidiary of TLGI. "EBITDA" for any period shall mean the sum of (a) Consolidated Net ------ Income during such period, plus (to the extent deducted in determining Consolidated Net Income), (b) all provisions for any income or similar taxes paid or accrued by TLGI and the Borrower and the other Subsidiaries during such period, (c) depreciation, depletion and amortization for such period, (d) other non-cash charges, and (e) Consolidated Interest Charges of TLGI and the Borrower and the other Subsidiaries during such period determined in accordance with GAAP; provided that for the fourth quarter of 1995 for all purposes under this -------- Agreement, EBITDA of TLGI, the Borrower and the other Subsidiaries on a consolidated basis shall be deemed to be $50,028,000. "Effective Date" means the first date on which the Agent shall have -------------- received counterparts of this Agreement duly executed by all parties hereto. "Equity Placement" means the offering by TLGI during the first ---------------- calendar quarter of 1996 of common shares in TLGI pursuant to which not less than C$150,000,000 of net proceeds was realized by TLGI. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance that bears interest at a ------------------ Eurodollar Rate. 11 "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for -------------------- the relevant Eurodollar Interest Period, (a) the per annum rate for deposits in Dollars for a period corresponding to the duration of the relevant Eurodollar Interest Period, which appears on Telerate Page 3750 at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period and (b) if such rate does not appear on Telerate Page 3750 on such day, the per annum rate at which deposits in Dollars are offered by Bank of Montreal to first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of Bank of Montreal's relevant Eurodollar Loan and having a maturity approximately equal to such Eurodollar Interest Period. The reference to Telerate Page 3750 in this definition shall be construed to be a reference to the relevant page or any other page that may replace such page on the Telerate service or any other service that may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for deposits in Dollars. "Eurodollar Interest Period" means, with respect to a Eurodollar -------------------------- Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter, unless there is no such numerically corresponding day in such next, second, third or sixth succeeding month, in which case such Eurodollar Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day, unless said next succeeding Business Day falls in a new calendar month, in which case such Eurodollar Interest Period shall end on the immediately preceding Business Day. "Eurodollar Loan" means a Revolving Loan which bears interest at a --------------- Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the --------------- relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (b) the Applicable Margin in effect from time to time during such Eurodollar Interest Period. The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "Existing Credit Agreements" means (a) the $400,000,000 Amended and -------------------------- Restated Multicurrency Credit Agreement dated as of May 11, 1995, among TLGI, the Borrower, the financial institutions parties thereto as lenders and The First National Bank of Chicago, as agent, as amended, supplemented or otherwise modified prior to the date hereof, 12 (b) the $100,000,000 Multicurrency Credit Agreement dated as of May 11, 1995, among TLGI, the Borrower, the financial institutions parties thereto as lenders and The First National Bank of Chicago, as agent, as amended, restated, supplemented or otherwise modified prior to the date hereof and (c) the line of credit letter agreement, dated March 18, 1996, between the Borrower, as borrower, and Bank of Montreal, as lender. "Extension Notification Date" has the meaning specified in Section --------------------------- ------- 2.18. - ---- "Extension Request" has the meaning specified in Section 2.18. ----------------- ------------ "Extension Request Date" has the meaning specified in Section 2.18. ---------------------- ------------ "Facility Termination Date" means May 29, 2001, or such later date in ------------------------- effect from time to time as the Facility Termination Date determined in accordance with the procedures described in Section 2.18. ------------ "Fair Value" means the value of the relevant asset determined in an ---------- arm's-length transaction conducted in good faith between an informed and willing buyer, under no compulsion to buy, and an informed and willing seller, under no compulsion to sell. "Federal Funds Effective Rate" means, for any day, an interest rate ---------------------------- per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Finance Subsidiary" means any captive finance Subsidiary of TLGI that ------------------ (i) buys accounts receivable or other financial assets of any Affiliate of TLGI, (ii) makes loans or otherwise extends credit to any such Affiliates, or (iii) succeeds to any or all of the business of LFW or Eagle or otherwise engages in finance activities similar to the finance activities engaged in by LFW or Eagle from time to time. "Financial Undertaking" of a Person means (a) any repurchase --------------------- obligation or liability of such Person or any of its Subsidiaries with respect to accounts or notes receivable sold by such Person or any of its Subsidiaries, (b) any liability under any sale and leaseback transactions which do not create a liability on the consolidated balance sheet of such Person and its Subsidiaries, (c) obligations arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries, or (d) net liabilities under any agreements, devices or arrangements designed to protect at least one of 13 the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options. "First Preferred Series C Receipts" means the 8,800,000 Convertible --------------------------------- First Preferred Shares Series C Receipts (C$220,000,000) issued by TLGI pursuant to the terms of that certain Prospectus, dated December 21, 1995, each such Receipt representing entitlement to 1/10 of a 6.00% Cumulative Redeemable Convertible First Preferred Share, Series C, of TLGI. "Fixed CD Base Rate" means, with respect to a Fixed CD Rate Advance ------------------ for the relevant CD Interest Period, the rate determined by the Agent to be the arithmetic average of the prevailing bid rates quoted to the Agent at or before 10:00 a.m. (Chicago time) on the first day of such CD Interest Period by three New York or Chicago certificate of deposit dealers of recognized standing selected by the Agent in its sole discretion for the purchase at face value of certificates of deposit of Bank of Montreal in the approximate amount of Bank of Montreal's relevant Fixed CD Rate Loan and having a maturity approximately equal to such CD Interest Period. "Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the ------------- relevant CD Interest Period, a rate per annum equal to the sum of (a) the quotient of (i) the Fixed CD Base Rate applicable to such CD Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such CD Interest Period, plus (b) the Assessment Rate applicable to such CD Interest Period, plus (c) the Applicable Margin in effect from time to time during such CD Interest Period. The Fixed CD Rate shall be rounded to the next higher multiple of one-hundredths of 1% if the rate is not such a multiple. "Fixed CD Rate Advance" means an Advance which bears interest at a --------------------- Fixed CD Rate. "Fixed CD Rate Loan" means a Revolving Loan which bears interest at a ------------------ Fixed CD Rate. "Fixed Rate" means the Fixed CD Rate or the Eurodollar Rate. ---------- "Fixed Rate Advance" means an Advance which bears interest at a Fixed ------------------ Rate. "Fixed Rate Loan" means a Revolving Loan which bears interest at a --------------- Fixed Rate. 14 "Floating Rate" means, for any day, a rate per annum equal to the sum ------------- of (a) the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes, plus (b) the Applicable Margin in effect for such day. "Floating Rate Advance" means an Advance which bears interest at the --------------------- Floating Rate. "Floating Rate Loan" means, as applicable, a Revolving Loan or a Swing ------------------ Line Loan which bears interest at the Floating Rate. "GAAP" means the generally accepted accounting principles generally ---- applied by TLGI as at December 31, 1995, and thereafter, Canadian GAAP until such time as TLGI and the Borrower shall prepare their respective books of record and account in accordance with U.S. GAAP, at which time and at all times thereafter, "GAAP" shall mean U.S. GAAP. ---- "Governmental Acts" has the meaning, specified in Section 2.21.6(a). ------------------ ----------------- "Governmental Authority" means any country or nation, any political ---------------------- subdivision of such country or nation, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government of any country or nation or political subdivision thereof. "Guarantor" means each of TLGI and each Pledgor Subsidiary and their --------- respective successors and assigns. "Guaranty" means each of (a) the Guaranty of TLGI set forth in Article -------- ------- V and (b) the Pledgor Subsidiary Guaranty. - - "Indebtedness" of a Person means, without duplication, such Person's ------------ (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens on or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, or other instruments (but exclusive of notes, bills and checks presented in the ordinary course of business by such Person to banks for collection or deposit), (e) Capitalized Lease Obligations, (f) Synthetic Lease Obligations, (g) Securitization Obligations, (h) Financial Undertakings, (i) Contingent Obligations and (j) obligations under or in connection with letters of credit (including, with respect to TLGI or the Borrower, any Letter of Credit); but excluding, in any event, (x) amounts payable by such Person in respect of covenants not to compete, and (y) with reference to TLGI, the Borrower and the other Subsidiaries, all obligations of TLGI, the Borrower and the other Subsidiaries of the 15 character referred to in this definition to the extent owing to TLGI, the Borrower or any other Subsidiary. "Interest Period" means a CD Interest Period or a Eurodollar Interest --------------- Period. "Investment" of a Person means any loan, advance (other than ---------- commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade), deposit account or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures or other securities of any other Person made by such Person. "L/C Commitment Amount" means $100,000,000. --------------------- "L/C Draft" means a draft drawn on the L/C Issuer pursuant to any of --------- the Letters of Credit. "L/C Interest" has the meaning specified in Section 2.21.2. ------------ -------------- "L/C Issuer" means Bank of Montreal. ---------- "L/C Obligations" means an amount equal to the sum (without --------------- duplication) of (i) the aggregate of the amount then available for drawing under each of the Letters of Credit, (ii) the face amounts of all outstanding L/C Drafts corresponding to the Letters of Credit, which L/C Drafts have been accepted by the L/C Issuer but not yet paid, (iii) the aggregate outstanding amount of Reimbursement Obligations at such time and (iv) the aggregate face amount of all Letters of Credit requested by the Borrower but not yet issued (unless such request has been denied). "Lenders" means the lending institutions listed on the signature pages ------- of this Agreement (including the Swing Line Lender), and any other lending institutions which may become party hereto pursuant to the terms hereof, and their respective successors and assigns permitted in accordance with the terms hereof. "Lending Installation" means, with respect to a Lender, any office, -------------------- branch, subsidiary or affiliate of such Lender. "Letter of Credit" means any standby letter of credit issued pursuant ---------------- to Section 2.21 hereof. ------------ "LFC" means Loewen Financial Corporation, a company incorporated under --- the laws of Barbados. 16 "LFW" means Loewen Finance (Wyoming) Limited Liability Company, a --- Wyoming limited liability company and a Wholly-Owned Subsidiary of TLGI. "Lien" means any lien (statutory or other), mortgage, pledge, ---- hypothecation, security interest, charge, assignment, deposit arrangement, encumbrance or other security agreement or arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "LMIC" means Loewen Management Investment Corporation, a Delaware ---- corporation and a Wholly-Owned Subsidiary of the Borrower. "Loan Documents" means this Agreement, the Letters of Credit, the -------------- Collateral Trust Agreement, and the promissory notes (if any) issued pursuant to Section 13.1. - ------------ "Major Acquisition" means any Acquisition of any Person which had ----------------- either (x) gross revenues in excess of $5,000,000 for the fiscal year of such Person most recently ended at the time of closing of such Acquisition or (y) total assets in excess of $5,000,000 as of the end of the fiscal year of such Person most recently ended at the time of closing of such Acquisition. "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- business, Property, financial condition, results of operations, or prospects of TLGI, the Borrower and the other Subsidiaries taken as a whole, (b) the ability of TLGI or the Borrower to perform their respective obligations under the Loan Documents, or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent, the L/C Issuer, the Collateral Agent or the Lenders thereunder, and "Material Adverse Effect" shall include, without ----------------------- limitation, the occurrence at any time of a Material Judgment Event; provided, -------- however, that at any time a determination of whether a Material Adverse Effect - ------- has occurred is to be made under the terms of this Agreement, such determination shall be made without taking into account the effect upon the business, Property, financial condition, results of operations or prospects of any of TLGI, the Borrower and their respective Subsidiaries at any time prior to the date of determination of (x) O'Keefe v. The Loewen Group, Inc., Civ. No. 91-67- --------------------------------- 423, filed in the Circuit Court of the First Judicial District of Hinds County, Mississippi (and all claims, litigation and proceedings pending or threatened which are related thereto) and Provident American Corporation v. The Loewen -------------------------------------------- Group, Inc., No. 92-1964, filed in the United States District Court for the - ----------- Eastern District of Pennsylvania (and all claims, litigation and proceedings pending or threatened which are related thereto) or (y) any settlements of such cases, made on or prior to December 31, 1995, or which as of December 31, 1995 were expected to be made after December 31, 1995. "Material Judgment Event" means a judgment, award or other order shall ----------------------- be entered (whether or not such judgment, award or other order is bonded, stayed, contested or 17 appealable) against any of TLGI, the Borrower or any of their respective Subsidiaries at any time when the amount of such judgment, award or order, when added to the aggregate amount of all other judgments, awards and orders which at such time shall have been entered against any of TLGI, the Borrower or any of their respective Subsidiaries without having been finally satisfied in full or vacated, shall be in excess of $100,000,000. "MEIP Credit Agreement" means that certain $121,300,000 1994 MEIP --------------------- Credit Agreement, dated as of June 14, 1994, among TLGI, the Borrower, LMIC, as agent for TLGI and the Borrower, the lenders party thereto, and Wachovia Bank of Georgia, N.A., as agent for the lenders, as it may be amended, restated, supplemented or otherwise modified from time to time. "Minority Interests" means any shares of stock of any class of a ------------------ Subsidiary (other than directors' qualifying shares as required by law or shares of stock having no right to vote or receive dividends) that are not owned by TLGI and/or one or more of its Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "MIPS" means the 9.45% Cumulative Monthly Income Preferred Securities, ---- Series A, issued by Loewen Group Capital, L.P. and the related Series A Junior Subordinated Debentures issued by the Borrower and purchased by Loewen Group Capital, L.P. with the proceeds of the sale of the 9.45% Cumulative Monthly Income Preferred Securities, Series A. "Moody's" means Moody's Investors Service, Inc. ------- "Multiemployer Plan" means a Plan maintained pursuant to a collective ------------------ bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Neweol" means Neweol Finance B.V., a company incorporated under the ------ laws of the Netherlands. "Non-Consenting Lender" has the meaning specified in Section 2.18. --------------------- ------------ "Note Agreements" means the agreements dated for reference October 1, --------------- 1991, September 1, 1993 and February 1, 1994, the indenture dated March 20, 1996, and any and all other warrant agreements and/or note agreements from time to time entered into 18 by TLGI, the Borrower, or either of them, and the relevant holders of notes issued and sold thereunder, in each case as amended, supplemented or otherwise modified from time to time. "Notice of Assignment" has the meaning specified in Section 13.3.2. -------------------- -------------- "Obligations" means all unpaid principal of and accrued and unpaid ----------- interest on the Revolving Loans and the Swing Line Loans, all L/C Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party hereunder arising under the Loan Documents. "Participant" has the meaning specified in Section 13.2.1. ----------- -------------- "Payment Office" means the principal office of the Agent in Chicago, -------------- Illinois, located on the date hereof at 115 South LaSalle Street, Chicago, Illinois 60603, or such other office of the Agent as the Agent may from time to time designate by written notice to the Borrower and the Lenders. All payments to be made to the Agent at the Payment Office shall be made by wire transfer to Harris Bank, Chicago, Illinois, ABA No. 071000288 for credit to Account No. 1248566 in the name of Bank of Montreal, with references to Loewen Group International, Inc. and the type of payment being made, or to such other account as the Agent may from time to time designate by written notice to the Borrower and the Lenders. "PBGC" means the Pension Benefit Guaranty Corporation, or any ---- successor thereto. "Permitted Acquisition" means any Acquisition (but only to the extent --------------------- such Acquisition does not involve lines of business which are outside of the TLGI Lines of Business, unless the Acquisition of such lines which are outside of the TLGI Lines of Business would, at the time of the Acquisition and after giving effect thereto, be permitted as Investments under Section 7.16(o)) made --------------- by TLGI, the Borrower or any other Subsidiary from a willing seller or other willing transferor where such Acquisition is not contested by such seller or transferor at any time during the pendency of such Acquisition; provided, that -------- (i) either (x) TLGI or the Borrower has in place before it executes any binding agreement or other binding writing by which it agrees to proceed with the Acquisition (whether or not subject to conditions) sufficient funds which are committed and available (which may include the availability of Revolving Loans under this Agreement (but only to the extent no Default or Unmatured Default would occur after then giving effect to the borrowing necessary to fund such Acquisition), and provided that for any third-party commitment such commitment is otherwise permitted under this Agreement), to fund the full amount of the cash consideration for such Acquisition, or (y) such agreement or other writing contains a condition to closing of TLGI or the Borrower based upon the ability of TLGI or the Borrower to raise funds for the Acquisition, and (ii) all contractual arrangements evidencing 19 such Acquisition include provisions subjecting the parties to arbitration except to the extent the Board of Directors of TLGI or the Borrower (or an authorized subcommittee thereof, a majority of whose members consist of directors who are not employees of TLGI, the Borrower or any other Subsidiary) shall either make an express determination to the contrary or shall approve the Acquisition pursuant to valid action which expressly contemplates the absence of such an arbitration provision in the contractual arrangements evidencing such Acquisition. "Permitted Receivables Securitization" means any transaction (or ------------------------------------ series of transactions) effected by TLGI or the Borrower or any Subsidiary of TLGI pursuant to which TLGI, the Borrower or such Subsidiary either (x) sells or otherwise transfers (including sales or transfers using one or more SPV's), or (y) grants a security interest in, assets of one or more of TLGI, the Borrower and the other Subsidiaries consisting of Receivables and Receivables Related Assets; provided, however, that the aggregate Securitization Obligations -------- ------- (without duplication) of TLGI, the Borrower, the Subsidiaries and any such SPV's in connection with all Permitted Receivables Securitizations shall not exceed $100,000,000 at any time outstanding. "Person" means any natural person, corporation, limited liability ------ company, firm, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by ---- Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pledgor Subsidiaries" means, at any time, each Subsidiary of TLGI or -------------------- the Borrower which at such time is party to the Collateral Trust Agreement as a pledgor of capital stock or other equity interests or, in the case of the Borrower, certain assets of the Borrower, held by it on the terms specified in the Collateral Trust Agreement. "Pledgor Subsidiary Guaranty" means the guaranty of each Pledgor --------------------------- Subsidiary set forth in the Collateral Trust Agreement. "Prepayment Notice" has the meaning specified in Section 2.5. ----------------- ----------- "Process Agent" has the meaning specified in Section 10.13. ------------- ------------- "Property" of a Person means any and all property, whether real, -------- personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. 20 "Purchasers" has the meaning specified in Section 13.3.1(a). ---------- ----------------- "Receivables" means all rights of TLGI, the Borrower or any Subsidiary ----------- to payments from Persons other than TLGI and its Subsidiaries (whether constituting accounts, chattel paper, instruments, general intangibles or otherwise, and including the right to payment of any interest or finance charges). "Receivables Program Assets" means (a) all Receivables which are -------------------------- described as being transferred by TLGI or its Subsidiaries pursuant to a Permitted Receivables Securitization, (b) all Receivables Related Assets, and (c) all collections (including recoveries) and other proceeds of the assets described in the foregoing clauses. "Receivables Related Assets" means (i) any rights arising under the -------------------------- documentation governing or relating to Receivables (including rights in respect of liens securing such Receivables and other credit support in respect of such Receivables), (ii) any collections, recoveries and proceeds of such Receivables and any lockboxes or accounts in which such proceeds are deposited, (iii) spread accounts and other similar accounts (and any amounts on deposit therein) established in connection with a Permitted Receivables Securitization, (iv) any warranty, indemnity, dilution and other intercompany claim arising out of documents relating to a Permitted Receivables Securitization and (v) other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Regional Partner" means any Subsidiary, all of the outstanding shares ---------------- entitled to receive dividends of which, shall at the time be owned or controlled, directly or indirectly, by TLGI or a Subsidiary of TLGI. "Register" has the meaning specified in Section 13.3.2. -------- -------------- "Regulation D" means Regulation D of the Board of Governors of the ------------ Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation G", "Regulation T", "Regulation U" and "Regulation X" ------------ ------------ ------------ ------------ mean, respectively, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to the subject matter thereof. "Reimbursement Obligation" is defined in Section 2.21.3. ------------------------ -------------- "Relevant Tax" has the meaning specified in Section 5.7. ------------ ----------- 21 "Rentals" of a Person means the aggregate fixed amounts payable by ------- such Person under any lease of Property having an original term (including any required renewals or any renewals at the option of the lessor or lessee) of one year or more. "Reportable Event" means a reportable event as defined in Section 4043 ---------------- of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided, however, that a failure to meet the -------- ------- minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means Lenders in the aggregate having at least 66- ---------------- 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate unpaid principal amount of the outstanding Advances, Swing Line Loans and the L/C Obligations. For purposes of this definition the aggregate unpaid principal amount of the outstanding Swing Line Loans held by Lenders at any time shall be determined such that all Swing Line Loans outstanding at such time shall be allocated among the Lenders ratably in accordance with their respective Commitments, notwithstanding that the Swing Line Lender at such time may have fully funded some or all of the outstanding Swing Line Loans. "Reserve Requirement" means, with respect to a CD Interest Period or a ------------------- Eurodollar Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on new non-personal time deposits of $100,000 or more with a maturity equal to that of such CD Interest Period (in the case of Fixed CD Rate Advances) or on Eurodollar liabilities (in the case of Eurodollar Advances). "Revolving Loan" means a loan by a Lender to the Borrower as part of -------------- an Advance. "Revolving Loan Borrowing Date" means a date on which an Advance is ----------------------------- made hereunder. "Revolving Loan Borrowing Notice" has the meaning specified in Section ------------------------------- ------- 2.6. - --- "Section" means a numbered section of this Agreement, unless another ------- document is specifically referenced. "Secured Parties" means the Lenders, the Persons specified on Schedule --------------- -------- 3 hereto as Secured Parties and, to the extent designated by the Borrower from - - time to time in 22 a writing delivered to the Agent and the Collateral Agent, all other Persons who from time to time hold Senior Obligations which are secured pursuant to the Collateral Trust Agreement; provided, however, that no Secured Parties shall be -------- ------- placed within the class to which the Lenders belong from time to time under the terms of the Collateral Trust Agreement unless the Required Lenders shall have given their affirmative approval thereof. "Securitization Obligations" of a Person means the outstanding -------------------------- purchaser's investment or outstanding capital or other principal equivalent that purchasers or other investors are entitled to receive in respect of any securitization or other sale or asset-backed financing of Receivables of such Person or its Affiliates effected by such Person. "Senior Obligations" means (i) the Obligations, (ii) the Indebtedness ------------------ described on Schedule 3 hereto, (iii) the obligations of TLGI or the Borrower ---------- under any and all interest rate or currency exchange swaps, caps, collars, floors or other similar transactions, or options on any of the foregoing, entered into by TLGI or the Borrower and having a term of at least two years from the date of entry into, and (iv) the unpaid principal of and accrued and unpaid interest on (together with all accrued and unpaid fees and expenses related to) Indebtedness for borrowed money incurred by TLGI, the Borrower or any Subsidiary with a maturity of at least two years from its date of issuance (or, in the case of revolving Indebtedness, with a term of at least two years from the date of execution of the documentation governing such revolving Indebtedness), which in the case of Indebtedness described in this clause (iv) ----------- is not secured except pursuant to the Collateral Trust Agreement and by its terms is not subordinated (except as expressly provided in the Collateral Trust Agreement) to the Obligations or any other senior indebtedness of TLGI, the Borrower or such Subsidiary, respectively. "Single Employer Plan" means a Plan maintained by the Borrower or any -------------------- member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Specified Remittance Time" means (a) if the relevant Payment Office ------------------------- is located in Chicago, 12:30 p.m. (Chicago time) and (b) if the relevant Payment Office is located elsewhere, such time as the Agent shall specify after consultation with the Borrower and the Lenders. "SPV" means a corporation, trust, partnership or other special purpose --- Person established by TLGI and/or its Subsidiaries solely for the purpose of implementing a Permitted Receivables Securitization. "Standard & Poor's" means Standard & Poor's Ratings Services, a ----------------- division of The McGraw-Hill Companies, Inc. 23 "Stated Amount" means, when used with reference to a Letter of Credit, ------------- (x) at the time of issuance, the face amount thereof, and (y) at any time thereafter, the aggregate amount available to be drawn under such Letter of Credit at such time. "Subsidiary" of a Person means (a) any corporation more than 50% of ---------- the outstanding securities having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding securities of which, shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding ownership interests of which, shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of TLGI. "Substantial Portion" means, with respect to the Property of TLGI and ------------------- the Borrower and the other Subsidiaries, Property of TLGI, the Borrower and the other Subsidiaries that has a Fair Value representing more than 5% of Consolidated Tangible Net Worth of TLGI, the Borrower and the other Subsidiaries determined as of the end of the fiscal quarter of TLGI most recently ended prior to the date on which such determination is made. "Swing Line Assignment" has the meaning specified in Section 13.3.1(b) --------------------- ----------------- "Swing Line Commitment" means the commitment of the Swing Line Lender --------------------- to make Swing Line Loans hereunder. "Swing Line Interest" has the meaning specified in Section 2.25(a). ------------------- --------------- "Swing Line Lender" means Bank of Montreal. ----------------- "Swing Line Loan" has the meaning specified in Section 2.22. --------------- ------------ "Swing Line Loan Borrowing Date" means a date on which a Swing Line ------------------------------ Loan is made hereunder. "Swing Line Loan Borrowing Notice" has the meaning specified in -------------------------------- Section 2.23. - ------------ "Synthetic Lease" of a Person means any lease of Property by such --------------- Person as lessee which under GAAP would or may be treated as a true operating lease but which under tax law or commercial law is treated as secured Indebtedness of such Person and not as a true lease. 24 "Synthetic Lease Obligations" of a Person means the aggregate funded --------------------------- amount under all Synthetic Leases to which such Person is party as lessee. "Taxing Jurisdiction" has the meaning specified in Section 5.7. ------------------- ----------- "TLGI" means The Loewen Group Inc., a corporation incorporated under ---- the laws of the Province of British Columbia, Canada. "TLGI Lines of Business" means the lines of business conducted as of ---------------------- the date of this Agreement by TLGI or the Borrower or any of their Subsidiaries and shall include the making by TLGI, the Borrower or any of their Subsidiaries, from time to time, of equity and debt investments in, or to, Persons which are engaged primarily in any one or more of the funeral, funeral home, cemetery and funeral-related insurance businesses. "Transferee" has the meaning specified in Section 13.4. ---------- ------------ "Type" means, (a) with respect to any Revolving Loan, its nature as a ---- Floating Rate Loan, Eurodollar Loan or Fixed CD Rate Loan, and (b) with respect to any Advance, its nature as a Floating Rate Advance, Eurodollar Advance or Fixed CD Rate Advance. "Unfunded Liabilities" means the amount (if any) by which the present -------------------- value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the Fair Value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans. "United States" and "U.S." mean the United States of America. ------------- ---- "Unmatured Default" means an event which but for the lapse of time or ----------------- the giving of notice, or both, would constitute a Default. "U.S. GAAP" means, at any time, generally accepted accounting --------- principles in the United States at such time. "Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of ----------------------- the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any partnership, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "WLSP Contingent Obligation" means the joint and several liability of -------------------------- Neweol to repay the $160,273,742 Zero Coupon Note dated November 1, 1994, executed by WLSP 25 Investment Partners I, a partnership formed under the laws of Switzerland, and payable to Wachovia Bank of Georgia, N.A. ARTICLE II THE CREDITS 2.1. The Revolving Loans. From and including the Effective Date and ------------------- prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement (including, without limitation, the terms and conditions of Section 2.10 and Section 9.1 relating to the ------------ ----------- reduction, suspension or termination of the Aggregate Commitment), to make Revolving Loans in Dollars to the Borrower from time to time in an aggregate amount, together with such Lender's L/C Interest and Swing Line Interest, not to exceed (except as otherwise contemplated by the last sentence of Section 2.19) ------------ at any one time outstanding the amount of such Lender's Commitment; provided, -------- however, that the Aggregate Commitment shall be deemed used for purposes of - ------- determining the availability of Revolving Loans (but not for purposes of determining each Lender's commitment fee pursuant to Section 2.10, which ------------ commitment fee shall be determined for each Lender as described in Section 2.10) ------------ from time to time to the extent of (x) the aggregate L/C Obligations then outstanding and (y) the aggregate principal amount of any Swing Line Loans then outstanding, and such deemed use of the Aggregate Commitment shall be applied to the Lenders ratably according to their respective Commitments. Subject to the terms of this Agreement (including, without limitation, the terms and conditions of Section 2.10 and Section 9.1 relating to the reduction, suspension or ------------ ----------- termination of the Aggregate Commitment), the Borrower may borrow, repay and reborrow Revolving Loans at any time prior to the Facility Termination Date. Unless earlier terminated in accordance with the terms and conditions of this Agreement, the Commitments of the Lenders to lend hereunder shall expire on the Facility Termination Date. 2.2. Repayment of the Revolving Loans. Any outstanding Revolving -------------------------------- Loans shall be paid in full by the Borrower on the Facility Termination Date; provided, however, that nothing in this Section 2.2 shall be construed as - -------- ------- ----------- limiting or modifying the obligation of the Borrower to repay any or all of the outstanding Revolving Loans at any earlier time in accordance with the terms of this Agreement. 2.3. Ratable Revolving Loans; Types of Advances. Each Advance ------------------------------------------ hereunder shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. Any Advance may be a Floating Rate Advance, a Fixed CD Rate Advance or a Eurodollar Advance, as the Borrower shall select in accordance with Sections 2.6 and 2.7. ------------ --- 2.4. Minimum Amount of Each Advance. Each Advance shall be in a ------------------------------ minimum amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess 26 thereof; provided, however, that any Advance may be in the amount of the unused -------- ------- Aggregate Commitment. 2.5. Optional Prepayments of Revolving Loans. Subject to Section 3.4 --------------------------------------- ----------- and the requirements of Section 2.4, the Borrower may (a) following notice given ----------- to the Agent by the Borrower, in the form attached hereto as Exhibit G (a --------- "Prepayment Notice") by not later than 11:00 a.m. (Chicago time) on the date of - ------------------ the proposed prepayment, such notice specifying the aggregate principal amount of and the proposed date of the prepayment (and if such notice is given the Borrower shall), prepay the outstanding principal amounts of the Floating Rate Loans comprising part of the same Advance in whole or ratably in part, together with accrued interest to but excluding the date of such prepayment on the principal amount prepaid and (b) following a Prepayment Notice given to the Agent by the Borrower by not later than 11:00 a.m. (Chicago time) on (i) if the Advance to be prepaid is a Fixed CD Rate Advance, the second Business Day preceding the date of the proposed prepayment, and (ii) if the Advance to be prepaid is a Eurodollar Advance, the third Business Day preceding the date of the proposed prepayment, such notice specifying the Advance to be prepaid and the proposed date of the prepayment, and if such notice is given, the Borrower shall prepay the outstanding principal amounts of the Fixed Rate Loans comprising a Fixed Rate Advance in whole (and not in part), together with accrued interest to but excluding the date of such prepayment on the principal amount prepaid. In the case of a Floating Rate Advance, each partial prepayment shall be in an aggregate principal amount not less than $10,000,000. 2.6. Method of Selecting Types and Interest Periods for New Advances. --------------------------------------------------------------- The Borrower shall select the Type of each Advance and, in the case of a Fixed Rate Advance, the Interest Period applicable to such Advance from time to time. The Borrower shall give the Agent irrevocable notice, in the form attached hereto as Exhibit F (a "Revolving Loan Borrowing Notice"), not later than 10:30 --------- ------------------------------- a.m. (Chicago time) (i) on the Revolving Loan Borrowing Date for each Floating Rate Advance, (ii) at least two Business Days before the Revolving Loan Borrowing Date for each Fixed CD Rate Advance, and (iii) at least three Business Days before the Revolving Loan Borrowing Date for each Eurodollar Advance specifying: (a) the Revolving Loan Borrowing Date, which shall be a Business Day, of such Advance, (b) the aggregate amount of such Advance, (c) the Type of such Advance, and (d) in the case of each Fixed Rate Advance, the Interest Period applicable thereto. 27 Not later than the Specified Remittance Time on each Revolving Loan Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans to the Agent in immediately available funds at the relevant Payment Office. To the extent that the Agent has received funds from the Lenders as specified in the preceding sentence, the Agent will make such funds available to the Borrower at the relevant Payment Office as promptly as reasonably practicable (but in any event within two hours) following the Specified Remittance Time, it being understood that if the relevant Payment Office is located in Chicago, the Agent will make the applicable funds available to the Borrower by depositing such funds to such account as the Borrower shall from time to time designate in a notice delivered to the Agent executed by two Authorized Officers. 2.7. Conversion and Continuation of Outstanding Advances. Floating --------------------------------------------------- Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Fixed Rate Advances or prepaid pursuant to Section 2.5. Each Fixed Rate Advance of any Type shall continue as ----------- a Fixed Rate Advance of such Type until the end of the then applicable Interest Period therefor, at which time such Fixed Rate Advance shall be automatically converted into a Floating Rate Advance unless the Borrower shall have given the Agent a Conversion/Continuation Notice requesting that, at the end of such Interest Period, such Fixed Rate Advance either continue as a Fixed Rate Advance of such Type for the same or another Interest Period or be converted into an Advance of another Type. Subject to the terms of Section 2.6, the Borrower may ----------- elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided that any conversion of any Fixed Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. The Borrower shall give the Agent irrevocable notice in the form of Exhibit I hereto (a "Conversion/Continuation Notice") of each --------- ------------------------------ conversion of an Advance or continuation of a Fixed Rate Advance not later than 10:00 a.m. (Chicago time) (i) in the case of a conversion into a Floating Rate Advance on the date of such conversion, (ii) in the case of a conversion into or continuation of a Fixed CD Rate Advance, at least two Business Days before the date of such conversion or continuation, and (iii) in the case of a conversion into or continuation of a Eurodollar Advance, at least three Business Days before the date of such conversion or continuation specifying: (a) the requested date, which shall be a Business Day, of such conversion or continuation; (b) the aggregate amount and Type of the Advance which is to be converted or continued; and (c) the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a Fixed Rate Advance, the duration of the Interest Period applicable thereto. 28 2.8. Payment of Interest on Revolving Loans and Advances. Interest --------------------------------------------------- accrued on each Floating Rate Advance shall be payable on the last Business Day of each calendar quarter for the calendar quarter then ending, and on the Facility Termination Date, the date of the reduction to zero of the Aggregate Commitment pursuant to Section 2.10, the date of any repayment of such Floating ------------ Rate Advance, and the date of the acceleration of the Obligations pursuant to Section 9.1. Interest accrued on each Fixed Rate Advance shall be payable on the - ------------ last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having an Interest Period longer than three months or 90 days, as the case may be, shall also be payable on the last day of each three-month or 90-day interval during such Interest Period. Interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest on Fixed Rate Advances shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (Chicago time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.9. Changes in Interest Rate, Etc. Each Floating Rate Advance shall bear ------------------------------ interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Fixed Rate Advance into a Floating Rate Advance pursuant to Section 2.7 to but excluding ----------- the date it becomes due or is converted into a Fixed Rate Advance pursuant to Section 2.7, at a rate per annum equal to the Floating Rate for such day. - ----------- Changes in the rate of interest on each Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Advance. No Interest Period may end after the Facility Termination Date. 2.10. Commitment Fee; Mandatory and Voluntary Reductions in Aggregate --------------------------------------------------------------- Commitment. (a) The Borrower agrees to pay to the Agent for the account of - ---------- each Lender a commitment fee at a rate per annum equal to the Applicable Commitment Fee Rate in effect from time to time on the daily unused portion of such Lender's Commitment from the Effective Date to but excluding the earliest of the Facility Termination Date, the date of the reduction to zero of the Aggregate Commitment pursuant to this Section 2.10 and the date of the ------------ termination of the Aggregate Commitment pursuant to Section 9.1; provided, ----------- -------- however, that, solely for purposes of this Section 2.10(a), (x) each Lender's - ------- --------------- Commitment (except the commitment of the Swing Line Lender) shall be determined without regard to any outstanding Swing Line Loans and (y) the Commitment of the Swing Line Lender shall be determined assuming that all outstanding Swing Line Loans have been made by the Swing 29 Line Lender. Such commitment fees shall be payable on the last Business Day of each calendar quarter for the quarter then ending, and on the earliest of the Facility Termination Date, the date of the reduction to zero of the Aggregate Commitment pursuant to this Section 2.10 and the date of the termination of the ------------ Aggregate Commitment pursuant to Section 9.1. Commitment fees shall be ----------- calculated for actual days elapsed on the basis of a 360-day year. (b) If as of the end of any fiscal year of TLGI, (x) the aggregate Fair Value of all Property, whether of TLGI, the Borrower or any Subsidiary of TLGI or the Borrower, sold during such fiscal year pursuant to the exception for sales of Property provided under Section 7.13(c) exceeds (y) the aggregate Fair --------------- Value, as determined by the board of directors of TLGI, of all consideration actually paid during such fiscal year in respect of Acquisitions, by at least $5,000,000, then within ten Business Days following the date on which TLGI delivers to the Agent financial statements in respect of such fiscal year pursuant to Section 7.1(a), the Borrower will, by written notice to the Agent -------------- given on or before the date such financial statements are delivered, reduce the Aggregate Commitment by an amount equal to such excess, rounded down to the nearest $100,000; provided, however, that any such reduction shall be made -------- ------- equally and ratably with the repayment of any other Indebtedness (if any) which by its terms must be repaid using the proceeds of the sale of such Property. Any such reduction in the Aggregate Commitment shall be allocated ratably among the Lenders. To the extent that the amount of any such mandatory reduction of the Aggregate Commitment exceeds the unused Aggregate Commitment on the date of such mandatory reduction, the Borrower shall, immediately prior to making such mandatory reduction of the Aggregate Commitment, prepay (subject to the proviso to the immediately preceding sentence) the outstanding Advances (as selected by the Borrower) in an amount at least equal to such excess; it being understood that the Borrower and each Guarantor shall be liable pursuant to Section 3.4 to ----------- indemnify each Lender against any loss or liability which that Lender incurs as a consequence of any prepayment under this Section 2.10(b). If, following any --------------- such prepayment of Advances, the amount of any such mandatory reduction of the Aggregate Commitment still exceeds the unused Aggregate Commitment on the date of such mandatory reduction, the Borrower shall cash collateralize the outstanding L/C Obligations as contemplated in Section 2.21.4 in an amount -------------- sufficient, together with the prepayments of Advances, to eliminate such excess. (c) The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $10,000,000, upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction; provided, however, -------- ------- that the amount of the Aggregate Commitment may not be reduced below the sum of the aggregate principal amount of the outstanding Advances and Swing Line Loans and the aggregate outstanding L/C Obligations. 2.11. Rates Applicable After Default. Notwithstanding anything to the ------------------------------ contrary contained in Section 2.6 or 2.7, during the continuance of a Default or ----------- --- Unmatured Default no Advance may be made as, converted into or continued as a Fixed Rate Advance. During 30 the continuance of a Default pursuant to Section 8.2, (a) each Fixed Rate ----------- Advance shall bear interest until paid in full or converted to a Floating Rate Advance at the Fixed Rate then applicable to such Advance plus 2% per annum, and (b) each Floating Rate Advance shall bear interest until paid in full at a rate per annum equal to the Floating Rate plus 2% per annum. 2.12. Method of Payment. Without limiting the operation of the first ----------------- sentence of Section 2.21.3(b), and without limiting the scope of Section ----------------- ------- 2.17(b), all payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in Dollars in immediately available funds to the Agent at the Payment Office, by the Specified Remittance Time on the date when due and shall be remitted by the Agent to the Lenders according to their respective interests therein. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at such Lender's address specified pursuant to Article XIV or at any Lending Installation specified in a ----------- notice received by the Agent from such Lender. The Agent is hereby authorized, but is not obligated, to charge the accounts of the Borrower maintained with Bank of Montreal into which proceeds of Advances are remitted pursuant to Section 2.6 for each payment of interest and fees as it becomes due hereunder, - ----------- for each payment of principal, in accordance with the applicable Prepayment Notice or when otherwise due and payable in accordance with the terms hereof, and for each payment of Obligations (including Reimbursement Obligations) when due and payable in accordance with the terms hereof. 2.13. Evidence of Debt; Telephonic Notices. (a) Each Lender shall ------------------------------------ maintain in accordance with its usual practice an account or accounts evidencing the Obligations of the Borrower to the appropriate Lending Installation of such Lender resulting from each Revolving Loan made by such Lending Installation of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lending Installation of such Lender from time to time under this Agreement. (b) The Agent shall maintain a Register pursuant to Section 13.3.2, and a -------------- subaccount for each relevant Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each relevant Revolving Loan made hereunder, whether such Revolving Loan is, as applicable, a Fixed CD Rate Loan, a Eurodollar Loan, a Fixed Rate Loan or a Floating Rate Loan, and the Interest Period applicable to any Fixed CD Rate Loan or Eurodollar Loan, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (c) The entries made in the Register, accounts and subaccounts maintained pursuant to paragraphs (a) and (b) of this Section 2.13 shall, to the extent -------------- --- ------------ permitted by applicable law, be prima facie evidence of the existence and ----- ----- amounts of the Obligations of the Borrower therein recorded; provided, that the -------- failure of any Lender or the Agent to maintain such 31 account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Revolving Loans (and all other amounts owing with respect thereto) in accordance with the terms of this Agreement. (d) The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances and effect selections of Types of Advances based on telephonic notices made by any person or persons the Agent in good faith believes to be acting on behalf of the Borrower, provided that the proceeds of -------- such Advances shall only be credited to such account as the Borrower shall from time to time designate in a notice delivered to the Agent executed by two Authorized Officers. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent of the relevant telephonic notice shall govern absent manifest error. 2.14. Notification of Advances, Interest Rates, Prepayments and Commitment -------------------------------------------------------------------- Reductions. Promptly after receipt thereof, the Agent will notify each Lender - ---------- of the contents of each Aggregate Commitment reduction notice, Revolving Loan Borrowing Notice, Swing Line Loan Borrowing Notice, Conversion/Continuation Notice, and prepayment notice received by it hereunder. The Agent will notify the Borrower and each Lender of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give the Borrower and each Lender prompt notice of each change in the Alternate Base Rate. 2.15. Lending Installations. Each Lender may book its Revolving Loans and --------------------- its Swing Line Interest and its L/C Interest at any one or more Lending Installations selected by such Lender and may change any such Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Revolving Loans, the Swing Line Interests and the L/C Interests shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or telex notice to the Agent and the Borrower, designate a Lending Installation through which Revolving Loans will be made by it and through which L/C Interests and Swing Line Interests will be held by it and for whose account Revolving Loan and Swing Line Loan payments and L/C Obligation payments are to be made. 2.16. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, --------------------------------- as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (a) in the case of a Lender, the proceeds of a Revolving Loan or (b) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the 32 Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (a) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (b) in the case of payment by the Borrower, the interest rate applicable to the relevant Revolving Loan. 2.17. Withholding Tax Exemption; Gross Up. (a) At least five Business Days ----------------------------------- prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Agent two additional copies of such form (or any successor form or related form as may from time to time be required under applicable law) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (b) All payments made by the Borrower under or in connection with this Agreement shall be made in full, without set-off or counterclaim, and free of and without deduction or withholding for or on account of any present or future tax, duty, assessment, impost, levy or other similar charge, or any penalties, fines or interest thereon (a "Relevant Tax") imposed upon TLGI, the Borrower, ------------ the Agent, any Lender or the L/C Issuer by the government of Canada (or any Governmental Authority thereof), the government of the United States of America (or any Governmental Authority thereof), or by the government of any other country or jurisdiction (or any Governmental Authority thereof) from or through which payments hereunder are actually made (each a "Taxing Jurisdiction"). The ------------------- Borrower, for the benefit of the Agent, the Lenders and the L/C Issuer, agrees that in the event any payments made by the Borrower hereunder or in connection herewith are subject to any deduction or withholding for or on account of any Relevant Tax, the Borrower will pay to the Agent, such Lender or the L/C Issuer such additional amounts as may be necessary in 33 order that the net amounts paid to the Agent, such Lender or the L/C Issuer pursuant to the terms of this Agreement after imposition of any such Relevant Tax (including deductions or withholdings applicable to additional amounts paid under this Section 2.17(b)) shall be not less than the amounts specified in this --------------- Agreement to be then due and payable, except that no such additional amounts shall be payable hereunder to the Agent, any Lender or the L/C Issuer that is liable for such Relevant Tax in respect of the relevant payment solely by reason of such recipient (a) having a permanent establishment in the Taxing Jurisdiction, (b) being organized under the laws of the Taxing Jurisdiction or any political subdivision thereof, (c) being resident in the Taxing Jurisdiction by virtue of its domicile or place of management being in the Taxing Jurisdiction, or (d) having failed to comply with the terms and conditions of Section 2.17(a) applicable to it. If the Agent, any Lender or the L/C Issuer - --------------- pays any amount in respect of a Relevant Tax, the Borrower shall indemnify the Agent, the Lender or the L/C Issuer, as the case may be, for such payment within 15 days of demand therefor by the Agent, such Lender or the L/C Issuer (in the case of such Lender or the L/C Issuer, made through the Agent). 2.18. Extension of Facility Termination Date. The Borrower may request an -------------------------------------- extension of the Facility Termination Date for a period of one year on each of May 29, 1997, and, if such first extension shall have become effective in accordance with the provisions of this Section 2.18, May 29, 1998 (each of May ------------ 29, 1997 and May 29, 1998, an "Extension Request Date"), by delivering a notice ---------------------- of such request in the form attached hereto as Exhibit H (an "Extension --------- --------- Request") to the Agent no more than 90 days and no fewer than 60 days preceding the relevant Extension Request Date. The Agent shall promptly notify each Lender of a requested extension. On or before the 30th day (or if such day is not a Business Day, the next succeeding Business Day) preceding the relevant Extension Request Date (such 30th day, the "Extension Notification Date"), each --------------------------- Lender shall notify the Agent whether that Lender consents to the requested extension of the Facility Termination Date, which consent may be given or withheld by each Lender in its sole and absolute discretion. Any Lender that fails to notify the Agent of its consent or non-consent by the Extension Notification Date will be deemed to have withheld consent (each such Lender together with each Lender that has provided notice of its non-consent to be referred to herein as a "Non-Consenting Lender"). If as of the close of --------------------- business on the Extension Notification Date, any Lender is a Non-Consenting Lender, the Agent shall immediately so advise the Borrower. During the period beginning on the first day following the Extension Notification Date and ending on the relevant Extension Request Date, each Non-Consenting Lender will, but only upon the written request of the Borrower given in the sole discretion of the Borrower, either (a) assign all of its rights and obligations under this Agreement (i) first, to the Lenders who have consented to the extension and are willing to accept such assignment, subject to ratable allocation by the Agent among such Lenders and (ii) second, to the extent such Non-Consenting Lender's rights and obligations hereunder have not been assigned to an existing Lender as contemplated in the foregoing clause (i), to one or more other financial ---------- institutions, nominated by the Borrower and acceptable to the Agent, that are willing to become Lenders hereunder through the Facility Termination Date as extended in accordance 34 with the relevant Extension Request; or (b) terminate its Commitment hereunder. If the Agent determines that any Lender is a Non-Consenting Lender, then the Agent shall give notice of such determination to each other Lender, and within ten (10) days following the giving of such notice (such period, the "Additional ---------- Consent Period") any Lender (notwithstanding any prior consent which such Lender - -------------- may have given) may give notice to the Agent that it elects to withhold its consent and be deemed a Non-Consenting Lender for all purposes hereunder. The obligation of a Non-Consenting Lender to assign its rights and obligations hereunder or terminate its Commitment hereunder as contemplated by this Section ------- 2.18 is subject to the requirements that (x) all amounts owing to that Non- - ---- Consenting Lender under the Loan Documents (including, without limitation, pursuant to Section 3.4) are paid in full upon the completion of such assignment ----------- or prior to such termination and (y) any assignment is effected in accordance with the terms of Section 13.3 and on terms otherwise satisfactory to the Non- ------------ Consenting Lender. A requested extension of the Facility Termination Date shall become effective only if (1) it has been approved by each Lender as of the close of business on the Extension Notification Date, or (2) prior to the expiration of the Additional Consent Period, each Non-Consenting Lender has either (A) assigned all of its rights and obligations hereunder to one or more other Lenders or to one or more successor financial institutions or (B) terminated its Commitment hereunder and the Aggregate Commitment has been reduced correspondingly. In any other event, the requested extension will be deemed to have been denied and the Facility Termination Date and the Lenders' respective Commitments will remain unchanged without any Non-Consenting Lender incurring any liability. 2.19. Mandatory Prepayments. Without limitation to the prepayment --------------------- obligations of the Borrower under Section 2.10(b), if, at any time, the --------------- aggregate principal amount of the then outstanding Revolving Loans, Swing Line Loans and L/C Obligations, as determined by the Agent, equals or exceeds the Aggregate Commitment as of such time, the Borrower shall, following demand by the Agent setting forth, in reasonable detail, the relevant calculations, prepay outstanding Revolving Loans and Swing Line Loans in accordance with the provisions of this Agreement until the aggregate principal amount of all outstanding Revolving Loans, Swing Line Loans and L/C Obligations does not exceed the Aggregate Commitment. The Borrower and each Guarantor shall be liable pursuant to Section 3.4 to indemnify each Lender against any loss or ----------- liability which that Lender incurs as a consequence of any prepayment under this Section 2.19. If, following any such prepayment or repayment of Revolving Loans - ------------ and Swing Line Loans, the aggregate principal amount of all outstanding Revolving Loans, Swing Line Loans and L/C Obligations still exceeds the Aggregate Commitment, the Borrower shall cash collateralize the outstanding L/C Obligations as contemplated in Section 2.21.4 in an amount sufficient, together -------------- with the prepayment and repayment of Revolving Loans and Swing Line Loans, to eliminate such excess. 2.20. Termination. All unpaid Obligations shall be paid in full by the ----------- Borrower on the Facility Termination Date; provided, however, that nothing in -------- ------- this Section 2.20 shall be ------------ 35 construed as limiting or modifying the obligation of the Borrower to repay any or all of the outstanding Obligations at any earlier time in accordance with the terms of this Agreement. 2.21. Letter of Credit Facility. ------------------------- 2.21.1 Letters of Credit. (a) Upon receipt of duly executed ----------------- applications therefor, and such other documents, instruments and agreements as the L/C Issuer may reasonably require, and subject to the provisions of Article IV, the L/C Issuer shall issue standby Letters of Credit (but not ---------- trade letters of credit) for the account of the Borrower, on terms as are satisfactory to the L/C Issuer; provided, however, that no Letter of Credit -------- ------- will be issued for the account of the Borrower by the L/C Issuer if on the date of issuance, before or after taking such Letter of Credit into account (i) the amount of the Advances, Swing Line Loans and the L/C Obligations at such time would exceed the Aggregate Commitment or (ii) the Aggregate outstanding amount of the L/C Obligations would exceed the L/C Commitment Amount; and provided, further, that no Letter of Credit shall be issued -------- ------- unless (A) it is denominated in Dollars and (B) it has an expiration date that is (1) no more than one year after the date of issuance of such Letter of Credit (provided that a Letter of Credit, subject to the immediately following clause (2), may provide for an annual renewal if such renewal is ---------- consented to by the L/C Issuer at the time of issuance and the conditions precedent to the issuance of such Letter of Credit are met at the time of such renewal) and (2) no later than the date which is five Business Days immediately preceding the Facility Termination Date. 2.21.2 Letter of Credit Participation. Immediately upon issuance of ------------------------------ each Letter of Credit by the L/C Issuer hereunder, each Lender shall be deemed to have automatically, irrevocably and unconditionally purchased and received from the L/C Issuer an undivided interest and participation in and to such Letter of Credit, the obligations of the Borrower in respect thereof, and the liability of the L/C Issuer thereunder (collectively, an "L/C Interest") in an amount equal to the amount available for drawing ------------ under such Letters of Credit multiplied by a fraction having as its numerator, such Lender's Commitment, and as its denominator, the Aggregate Commitment. The L/C Issuer will notify each Lender promptly upon presentation to it of an L/C Draft or upon any other draw under any Letter of Credit. On or before the Business Day on which the L/C Issuer makes payment of any L/C Draft or, in the case of any other draw on the Letter of Credit, on demand of the L/C Issuer (provided that the Borrower has not prior thereto made payment therefor and no Floating Rate Advance has been made pursuant to Section 2.21.3 with respect thereto), each Lender shall -------------- make payment to the Agent, for credit to the L/C Issuer, in immediately available funds in an amount equal to such Lender's ratable share (determined in accordance with the fraction described above) of the amount of such payment or draw. Provided that each Letter of Credit is issued by the L/C Issuer in accordance with the terms of this Agreement, the obligation of each Lender to reimburse the L/C Issuer 36 under this Section 2.21.2 shall be unconditional, continuing, irrevocable -------------- and absolute and shall not be affected or impaired by, among other things, the occurrence of the Facility Termination Date or the reduction, suspension or termination (except pursuant to Section 2.18) of the ------------ Aggregate Commitment or such Lender's Commitment in accordance with the terms of this Agreement. In the event that any Lender fails to make payment to the Agent of any amount due to the L/C Issuer under this Section 2.21.2, -------------- the Agent shall be entitled to receive for the benefit of the L/C Issuer, and the L/C Issuer shall be entitled to receive, retain and apply against such obligation the principal and interest and other amounts otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied; provided, -------- however, that nothing contained in this sentence shall relieve such ------- Lender of its obligation to reimburse the L/C Issuer for such amount in accordance with this Section 2.21.2. -------------- 2.21.3 Reimbursement Obligation. (a) The Borrower agrees ------------------------ unconditionally, irrevocably and absolutely to pay immediately to the Agent, for the account of the L/C Issuer and the Lenders, the amount of each L/C Draft or other demand which may be drawn under or pursuant to a Letter of Credit (such obligation of the Borrower to pay the Agent (for the account of the L/C Issuer and the Lenders) being hereinafter referred to as a "Reimbursement Obligation" with respect to a Letter of Credit or L/C ------------------------ Draft). The obligations of the Borrower under this Agreement and otherwise in respect of Letters of Credit and L/C Drafts shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit, this Agreement or any Loan Document; (ii) any amendment or waiver of or any consent to departure from this Agreement or any other Loan Document; (iii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the L/C Issuer, the Agent, any Lender, any beneficiary of any Letter of Credit (or any Person for whom any such beneficiary may be acting), or any other Person, whether in connection with this Agreement, any other Loan Document or any unrelated transactions; (iv) any statement in any certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any such statement being untrue or inaccurate in any respect whatsoever; 37 (v) payment by the L/C Issuer under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit (provided that the L/C Issuer was not grossly negligent in connection therewith); or (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. (b) If the Borrower at any time fails to repay a Reimbursement Obligation pursuant to this Section 2.21.3, the Borrower shall be deemed to -------------- have elected to borrow a Floating Rate Advance from the Lenders, as of the date of the L/C Draft or other demand giving rise to the Reimbursement Obligation, equal in amount to the amount of the unpaid Reimbursement Obligation, the proceeds of which Advance shall be used to repay such Reimbursement Obligation; provided, however, that such Floating Rate -------- ------- Advance shall be deemed to have been borrowed only to the extent that (x) both immediately before and after giving effect thereto, no Default or Unmatured Default under Section 8.6 or 8.7 shall have occurred and be ----------- --- continuing, and (y) the Facility Termination Date (or the date of any earlier termination of the Aggregate Commitment pursuant to this Agreement) shall not have occurred prior thereto. For each Reimbursement Obligation for which a Floating Rate Advance is not deemed to have been borrowed by the Borrower, each Lender shall be deemed to have automatically purchased and received from the L/C Issuer an undivided interest and participation in and to such Reimbursement Obligation in an amount equal to such Reimbursement Obligation multiplied by a fraction having as its numerator, such Lender's Commitment, and as its denominator, the Aggregate Commitment. If, for any reason, the Borrower fails to repay a Reimbursement Obligation on the day such Reimbursement Obligation arises, either directly or through a Floating Rate Advance, then such Reimbursement Obligation shall bear interest from and after such day, until paid in full, at the interest rate applicable to Floating Rate Advances (including, during the continuance of a Default or Unmatured Default, at the rates determined pursuant to Section 2.11). ------------ 2.21.4 Cash Collateral. Notwithstanding anything to the contrary --------------- herein or in any application for any Letter of Credit, (a) after the occurrence and during the continuance of a Default or (b) to the extent necessary in connection with any mandatory reduction of the Aggregate Commitment pursuant to Section 2.10(b) or any mandatory prepayment or --------------- repayment of Revolving Loans pursuant to Section 2.19, the Borrower shall, ------------ upon the demand of the Required Lenders or the Agent at the request of the Required Lenders, or if earlier, at the time of the applicable mandatory reduction of the Aggregate Commitment pursuant to Section 2.10(b) or --------------- mandatory prepayment or repayment of Revolving Loans pursuant to Section ------- 2.19, as the case may be, deliver to the Agent for the benefit of the L/C ---- Issuer and the Lenders, cash collateral in an amount equal to the aggregate outstanding L/C Obligations, or in 38 connection with a deposit made pursuant to the foregoing clause (b), such ---------- lesser amount of the outstanding L/C Obligations as shall satisfy the requirements of Section 2.10(b) and Section 2.19, as applicable. Any such --------------- ------------ collateral shall be held by the Agent in a separate account appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and retained by the Agent for the benefit of the L/C Issuer and the Lenders as collateral security for the Borrower's obligations in respect of this Agreement and the Letters of Credit and L/C Drafts. Such amounts shall be applied to reimburse the L/C Issuer for drawings or payments under or pursuant to the Letters of Credit or L/C Drafts, or if no such reimbursement is required, such amounts shall be applied ratably to the payment of any other unpaid costs, fees, expenses and other Obligations related to the Letters of Credit, any L/C Drafts and such cash collateral account as the Agent shall determine. If no Default shall be continuing, amounts remaining in any cash collateral account established pursuant to clause (a) of this Section 2.21.4 which are not to ---------- -------------- be applied to reimburse the L/C Issuer or the Lenders for amounts actually paid or to be paid by the L/C Issuer or the Lenders in respect of the Letters of Credit or L/C Drafts, shall be returned to the Borrower (after deduction of the Agent's expenses incurred in connection with such cash collateral account) except to the extent such amounts (or portions thereof) are necessary to satisfy the cash collateral requirements of clause (b) of ---------- this Section 2.21.4. In addition, if the conditions giving rise to a -------------- deposit of cash collateral pursuant to clause (b) of this Section 2.21.4 ---------- -------------- cease to exist, any amounts remaining in any cash collateral account established pursuant to such clause (b) which are not to be applied to ---------- reimburse the L/C Issuer or the Lenders for amounts actually paid or to be paid by the L/C Issuer or the Lenders in respect of the Letters of Credit or L/C Drafts, shall be returned to the Borrower (after deduction of the Agent's expenses incurred in connection with such cash collateral account) except to the extent such amounts (or portions thereof) are necessary to satisfy the cash collateral requirements of clause (a) of this ------ --- Section 2.21.4.Investment earnings (net of investment losses and any -------------- unpaid costs, fees, expenses and other Obligations related to the Letters of Credit, any L/C Drafts and such cash collateral account) on amounts on deposit in the cash collateral account (which investments shall be limited to interest bearing deposit accounts with the Agent) shall be for the account of the Borrower, and, except at such time as a Default shall have occurred and be continuing, the Agent shall remit any such accrued earnings to the Borrower no less frequently than quarterly. 2.21.5 Letter of Credit Fees. The Borrower agrees to pay (a) to the --------------------- Agent for the ratable benefit of the Lenders, a letter of credit fee equal to the Applicable Letter of Credit Fee Rate in effect from time to time on the daily sum of (x) the aggregate outstanding amount of L/C Obligations less (y) the aggregate outstanding amount of Reimbursement Obligations, such fee to be paid in arrears on the last Business Day of each calendar quarter for the quarter then ending, and on the Facility Termination Date, and such fee to be calculated for actual days elapsed on the basis of 39 a 360-day year, and (b) to the Agent for the benefit of the L/C Issuer, as issuing bank, the fees agreed to by the Borrower and Bank of Montreal pursuant to that certain letter agreement dated as of May 15, 1996, or as otherwise agreed from time to time, together with all customary fees and other issuance, amendment, negotiation and presentment expenses and related charges in connection with the issuance, amendment, negotiation and presentation of L/C Drafts, and the like customarily charged by the L/C Issuer with respect to standby letters of credit, payable at the time of invoice of such amounts by the L/C Issuer. 2.21.6 Indemnification; Exoneration. (a) In addition to amounts ---------------------------- payable as elsewhere provided in this Agreement, Borrower hereby agrees to protect, indemnify, pay and save harmless the L/C Issuer, each Lender and the Agent from and against any and all liabilities and costs which the L/C Issuer, any Lender or the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit other than, in the case of the L/C Issuer, as a result of its gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, or (ii) the failure of the L/C Issuer to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto governmental authority (all such acts or omissions herein called "Governmental Acts"). ------------------ (b) As among the Borrower, the L/C Issuer, the Lenders and the Agent, the Borrower assumes all risks of the acts and omissions of, or misuse of a Letter of Credit by, the beneficiary of any Letter of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the letter of credit application and any letter of credit reimbursement agreement submitted or executed by the Borrower in connection with any Letter of Credit (except to the extent otherwise provided in paragraph (e) of this Section 2.21.6), the L/C Issuer, the Lenders and the ------------- -------------- Agent shall not be responsible (in the absence of gross negligence or willful misconduct in connection therewith): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any Letter of Credit to comply duly with conditions required in order to draw upon any Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telecopy, telex or other similar form of teletransmission or otherwise; (v) for errors in interpretation of technical trade terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the 40 beneficiary of any Letter of Credit of the proceeds of any drawing under any Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the L/C Issuer, the Lenders and the Agent including, without limitation, any Governmental Acts. None of the above shall affect, impair or prevent the vesting of any rights or powers of the L/C Issuer under this Section 2.21.6. -------------- (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the L/C Issuer under or in connection with a Letter of Credit issued on behalf of the Borrower or any related certificates shall not, in the absence of gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, put the L/C Issuer, any Lender or the Agent under any resulting liability to the Borrower or relieve the Borrower of any of its obligations hereunder to any such Person. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.21.6 shall survive the payment in full of -------------- principal, interest and all other amounts hereunder, the termination of the Letters of Credit and the termination of this Agreement. (e) Notwithstanding anything therein to the contrary, in the event any of the provisions of any letter of credit application or letter of credit reimbursement agreement submitted or executed by the Borrower in connection with any Letter of Credit conflict with the provisions of this Agreement, the terms of this Agreement shall govern. 2.21.7 Letter of Credit Cancellation. For all purposes hereunder, ----------------------------- including (without limitation) Section 2.21.5, a Letter of Credit shall be deemed outstanding until the earlier to occur of (i) the occurrence of the date expressly designated therein as the expiration date for such Letter of Credit and (ii) the physical receipt by the L/C Issuer of such Letter of Credit marked "cancelled" accompanied by evidence from the beneficiary thereof satisfactory to the L/C Issuer to such effect. 2.22. Swing Line Commitment. Subject to the terms and conditions of this --------------------- Agreement, the Swing Line Lender agrees to make loans to the Borrower on a revolving basis (each such loan, a "Swing Line Loan") from time to time on any --------------- Business Day during the period from and including the date of this Agreement to the Facility Termination Date in an aggregate principal amount at any one time outstanding not to exceed $10,000,000; provided, however, that (x) the sum of -------- ------- the aggregate principal amount of all outstanding Swing Line Loans plus the aggregate principal amount of all outstanding Revolving Loans plus the aggregate outstanding L/C Obligations shall not at any time exceed the Aggregate Commitment, and (y) the Swing Line Lender shall have no obligation to make a Swing Line Loan if the principal amount of such Swing Line Loan, when added to the aggregate principal amount of all Swing Line Loans then outstanding, the L/C Obligations owing to the Swing Line Lender in its capacity as a Lender and the aggregate 41 principal amount of all Revolving Loans made by the Swing Line Lender in its capacity as a Lender shall exceed the Commitment applicable to the Swing Line Lender in its capacity as a Lender. All Swing Line Loans shall be made in Dollars and maintained as Floating Rate Loans with interest thereon payable under the terms of Sections 2.8 and 2.11, and repayments to be made thereof ------------ ---- under the terms of Sections 2.5 (except for the last sentence thereof), 2.12, ------------ ---- 2.14, and 2.20, in each case as if such Swing Line Loan were a Floating Rate - ---- ---- Advance. 2.23. Borrowing Procedures for Swing Line Loans. The Borrower shall give ----------------------------------------- the Agent and the Swing Line Lender irrevocable notice, in the form attached hereto as Exhibit L (a "Swing Line Loan Borrowing Notice"), of each proposed --------- -------------------------------- borrowing pursuant to this Section 2.23 not later than 10:30 a.m. (Chicago time) ------------ on the proposed date of borrowing. Each such notice shall be effective upon receipt by the Agent and the Swing Line Lender and shall specify the date and amount of borrowing. Unless the Swing Line Lender has received written notice prior to 8:00 a.m. (Chicago time) on the proposed Swing Line Loan Borrowing Date (or at any time prior to the Swing Line Loan Borrowing Date) from the Agent or any Lender that one or more of the conditions precedent set forth in Article IV ---------- with respect to such borrowing is not then satisfied, the Swing Line Lender shall pay over the requested amount to the Borrower on the requested Borrowing Date. Each Swing Line Loan shall be made on a Business Day and shall be in the amount of at least $500,000 and an integral multiple of $250,000. The Swing Line Lender will promptly notify the Agent, and the Agent shall promptly notify each Lender, of the making and amount of each Swing Line Loan and of the maturity date thereof if it is later than the fourteenth (14th) day following the Swing Line Loan Borrowing Date therefor. 2.24. Refunding of Swing Line Loans. The Borrower shall repay each Swing ----------------------------- Line Loan on or before the earlier to occur of (x) the fourteenth (14th) day following the Swing Line Loan Borrowing Date for such Swing Line Loan (or such later date as the Borrower and the Swing Line Lender shall from time to time agree) or (y) the Facility Termination Date. If the Borrower fails to repay any Swing Line Loan when due, the Swing Line Lender may, at any time thereafter in its sole and absolute discretion, on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf), request each Lender to make a Revolving Loan, ratably in proportion to the ratio that such Lender's respective Commitment bears to the Aggregate Commitment, of the principal amount of the Swing Line Loans outstanding on the date such notice is given. Unless any of the events described in Section 8.6 or 8.7 shall have ----------- --- occurred (in which event the procedures of Section 2.25 shall apply), and ------------ regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Loan are then satisfied or the aggregate amount of such Revolving Loans is not in the minimum or integral amount otherwise required hereunder, each Lender shall make the proceeds of its Revolving Loan available to the Agent for the account of the Swing Line Lender at the Payment Office in immediately available funds prior to 11:00 a.m. (Chicago time) on the Business Day next succeeding the date such 42 notice is given. The proceeds of such Revolving Loans shall be immediately applied to repay the outstanding Swing Line Loans. All Revolving Loans made pursuant to this Section 2.24 shall be Floating Rate Loans. ------------ 2.25. Participations in Swing Line Loans. (a) If an event described in ---------------------------------- Section 8.6 or 8.7 occurs (or for any reason the Lenders are prohibited from - ----------- --- making, or otherwise may not make, Revolving Loans pursuant to Section 2.24), ------------ each Lender shall, upon notice from the Agent given at the request of the Swing Line Lender, purchase from the Swing Line Lender (and the Swing Line Lender shall sell to each such Lender) an undivided participation interest in all Swing Line Loans then outstanding, ratably in proportion to the ratio that such Lender's respective Commitment bears to the Aggregate Commitment (and each Lender shall immediately transfer to the Agent, for the account of the Swing Line Lender, in immediately available funds, the principal amount reflecting its participation). The participation interest of each Lender in the Swing Line Loans is referred to herein as such Lender's "Swing Line Interest". ------------------- (b) Whenever, at any time after the Swing Line Lender has received payment for any Lender's Swing Line Interest pursuant to subsection 2.25(a), the Swing ------------------ Line Lender receives any payment on account thereof, the Swing Line Lender will distribute promptly to the Agent for the account of such Lender its Swing Line Interest in such amount (in the case of interest payments, appropriately adjusted to reflect the period of time during which such Lender's Swing Line Interest was outstanding and funded) in like funds as received; provided, -------- however, that in the event that such payment received by the Swing Line Lender - ------- is required to be returned, such Lender will return to the Agent for the account of the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it in like funds as such payment is required to be returned by the Swing Line Lender. 2.26. Swing Line Participation Obligations Unconditional. Provided that -------------------------------------------------- each Swing Line Loan is made by the Swing Line Lender in accordance with the terms of this Agreement, each Lender's obligation to make Revolving Loans pursuant to Section 2.24 and/or to purchase participation interests in Swing ------------ Line Loans pursuant to Section 2.25 shall be absolute and unconditional and ------------ shall not be affected by any circumstance whatsoever, including (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, TLGI, the Borrower or any of their Affiliates, or any other Person for any reason whatsoever; (b) the occurrence or continuance of a Default or Unmatured Default; (c) the occurrence of a Material Adverse Effect or any adverse change in the condition (financial or otherwise) of any other Person; (d) any breach of this Agreement by any party; (e) any inability of the conditions precedent to borrowing set forth in this Agreement to be satisfied on the date upon which any Swing Line Loan is to be refunded or any participation interest therein is to be purchased; or (f) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 43 2.27. Evidence of Swing Line Loans; Telephonic Notices. (a) The Swing ------------------------------------------------ Line Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Obligations of the Borrower to the appropriate Lending Installation of such Swing Line Lender resulting from each Swing Line Loan made by it from time to time, including the amounts of principal thereof and interest thereon payable and paid to such Lending Installation of the Swing Line Lender from time to time under this Agreement. (b) The Agent shall maintain a Register pursuant to Section 13.3.2, and a -------------- subaccount for the Swing Line Lender, in which Register and subaccount (taken together) shall be recorded (i) the amount of each Swing Line Loan made hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to the Swing Line Lender in respect of such Swing Line Loans, and (iii) the amount of any sum received by the Agent hereunder from the Borrower in respect of such Swing Line Loans. (c) The entries made in the Register, account and subaccount maintained pursuant to paragraphs (a) and (b) of this Section 2.27 shall, to the extent -------------- --- ------------ permitted by applicable law, be prima facie evidence of the existence and ----- ----- amounts of the Obligations of the Borrower therein recorded in respect of Swing Line Loans; provided, that the failure of the Swing Line Lender or the Agent to -------- maintain such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Swing Line Loans (and all other amounts owing with respect thereto) in accordance with the terms of this Agreement. (d) The Borrower hereby authorizes the Swing Line Lender and the Agent to extend Swing Line Loans based on telephonic notices made by any person or persons the Agent in good faith believes to be acting on behalf of the Borrower, provided that the proceeds of such Swing Line Loans shall only be credited to - -------- such account as the Borrower shall from time to time designate in a notice delivered to the Agent and the Swing Line Lender executed by two Authorized Officers. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or the Swing Line Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Swing Line Lender, the records of the Agent of the relevant telephonic notice shall govern absent manifest error. 2.28. Conditions to Swing Line Loans. Notwithstanding any other provision ------------------------------ of this Agreement, the Swing Line Lender shall not be obligated to make any Swing Line Loan (i) unless all of the conditions set forth in Article IV ---------- applicable thereto shall have been satisfied and (ii) if a Default or Unmatured Default would result therefrom. 44 ARTICLE III CHANGE IN CIRCUMSTANCES 3.1. Yield Protection. If any change in law or any governmental or quasi- ---------------- governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender or the L/C Issuer therewith, (a) subjects any Lender or the L/C Issuer or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower or TLGI or any other Person obligated hereunder to any Lender or the L/C Issuer (excluding taxation of the overall net income of any Lender or the L/C Issuer or any applicable Lending Installation or other taxes in lieu of such taxes imposed by the United States or any jurisdiction in which such Lender or the L/C Issuer has its principal office or applicable Lending Installation or is engaged in business), or changes the basis of taxation of payments to any Lender or the L/C Issuer in respect of its Revolving Loans, Swing Line Loans, Swing Line Interests, L/C Interests, L/C Obligations or other amounts due it hereunder, or (b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with, or for the account of, or credit extended by, any Lender or the L/C Issuer or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Fixed Rate Advances), or (c) imposes any other condition the result of which is to increase the cost to any Lender or the L/C Issuer or any applicable Lending Installation of making, funding or maintaining loans or issuing or participating in letters of credit or reduces any amount receivable by any Lender or the L/C Issuer or any applicable Lending Installation in connection with loans or letters of credit, or requires any Lender or the L/C Issuer or any applicable Lending Installation to make any payment calculated by reference to the amount of loans or letters of credit held, or interest received by it, by an amount deemed material by such Lender or the L/C Issuer, as the case may be. then, within 15 days of demand by such Lender or the L/C Issuer, the Borrower shall pay such Lender or the L/C Issuer that portion of such increased expense incurred or reduction in an amount received which such Lender or the L/C Issuer determines is attributable to making, funding and maintaining its Revolving Loans, Swing Line Loans, Swing Line Interests, L/C Interests, the Letters of Credit, the L/C Obligations and its Commitment (and in the case of the Swing Line Lender, its Swing Line Commitment, and in the case of the L/C Issuer, its commitment to issue Letters of Credit). 45 3.2. Changes in Capital Adequacy Regulations. If a Lender or the L/C --------------------------------------- Issuer determines that the amount of capital required or expected to be maintained by such Lender or the L/C Issuer, any Lending Installation of such Lender or any corporation controlling such Lender or the L/C Issuer is increased as a result of a Change (as defined below in this Section 3.2), then, within 15 ----------- days of demand by such Lender or the L/C Issuer, the Borrower shall pay such Lender or the L/C Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the L/C Issuer determines is attributable to this Agreement, its Revolving Loans, Swing Line Loans, Swing Line Interests, L/C Interests, the Letters of Credit, the L/C Obligations or its obligation to make Revolving Loans (or in the case of the Swing Line Lender, its obligations to make Swing Line Loans, or in the case of the L/C Issuer, its commitment to issue Letters of Credit) or participate in Swing Line Loans or Letters of Credit hereunder or to issue Letters of Credit (after taking into account such Lender's or the L/C Issuer's or such controlling corporation's policies as to capital adequacy). "Change" ------ means (a) any change after the date of this Agreement in the Risk-Based Capital Guidelines (as defined below in this Section 3.2) or (b) any adoption of or ----------- change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or the L/C Issuer or any Lending Installation or any corporation controlling any Lender or the L/C Issuer. "Risk-Based Capital Guidelines" means (a) the risk-based capital ----------------------------- guidelines in effect in the United States on the date of this Agreement, including transition rules, and (b) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that --------------------------------- maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, or if the Required Lenders determine that (a) deposits of a type and maturity appropriate to match fund Fixed Rate Advances are not available or (b) the interest rate applicable to a Type of Advance does not accurately reflect the cost of making or maintaining such Advance, then the Agent shall suspend the availability of the affected Type of Advance and require any Fixed Rate Advances of the affected Type to be prepaid or converted into a Floating Rate Advance. 3.4. Funding Indemnification. If (i) any payment of a Fixed Rate ----------------------- Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise (including, without limitation, as a result of a mandatory prepayment of a Fixed Rate Advance pursuant to Section 2.10(b) or 2.19), or (ii) as a result of an --------------- ---- assignment of a Lender's Commitment and its outstanding Revolving Loans, 46 Swing Line Interest and L/C Interest by operation of Section 2.18 or Section ------------ ------- 3.5, a Fixed Rate Advance made by the assigning Lender is assigned on a date - --- which is not the last day of the applicable Interest Period, or (iii) a Fixed Rate Advance is not made, continued or converted on the date specified by the Borrower for any reason other than default by the Lenders, or (iv) an optional prepayment, notice of which has been given in accordance with Section 2.5, is ----------- not made on the date specified therefor in such notice, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance, or in liquidating or terminating prior to scheduled maturity any foreign exchange contracts, currency swaps or other similar hedging arrangements entered into in connection with the Fixed Rate Advance. 3.5. Mitigation; Lender Statements; Survival of Indemnity. (a) To the ---------------------------------------------------- extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Fixed Rate Loans to reduce any liability of the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the ------------ --- unavailability of a Type of Advance under Section 3.3, so long as such ----------- designation is not disadvantageous to such Lender. If the obligation of the Lenders to make Eurodollar Advances has been suspended pursuant to Section 3.3, ----------- as a consequence of a determination by any Lender that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law or any Lender has demanded compensation under Section 3.1 or 3.2, the ----------- --- Borrower may elect (i) subject to Section 3.4, to prepay any outstanding ----------- Advances to the extent necessary to mitigate its liability under Section 3.1 or ----------- 3.2, (ii) to terminate the applicable Lender's Commitment hereunder or (iii) to - --- require the applicable Lender to assign its outstanding Revolving Loans, Swing Line Interests, L/C Interests and Commitment hereunder to another financial institution designated by the Borrower and reasonably acceptable to the Agent; provided, however, that the Borrower may make the elections described in the - -------- ------- foregoing clauses (i) and (ii) only at such times as no Default or Unmatured ----------- ---- Default shall have occurred and be continuing. The obligation of a Lender to assign its rights and obligations hereunder or terminate its Commitment hereunder as contemplated by this Section 3.5(a) is subject to the requirements -------------- that (x) all amounts owing to that Lender under the Loan Documents (including, without limitation, pursuant to Section 3.4) are paid in full upon the ----------- completion of such assignment or prior to such termination and (y) any assignment is effected in accordance with the terms of Section 13.3 and on terms ------------ otherwise satisfactory to that Lender. (b) Each Lender or the L/C Issuer, as the case may be, shall deliver a written statement of such Person as to the amount due, if any, under Section ------- 3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail - --- --- --- the calculations upon which such Person determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though each Lender funded such Fixed Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the interest rate applicable to such Fixed Rate 47 Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement shall be payable on demand after receipt by the Borrower of the written statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the ------------ --- --- Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Advance, Swing Line Loan and Letter of Credit. The ----------------------------------------------------- Lenders shall be obligated (subject to Section 4.2) to make the initial Advance ----------- and purchase participations in Swing Line Loans and the Letters of Credit hereunder, the L/C Issuer shall be obligated (subject to Section 4.2) to issue ----------- the initial Letter of Credit hereunder, and the Swing Line Lender shall be obligated (subject to Section 4.2) to make the initial Swing Line Loan ----------- hereunder, only after (x) the Effective Date shall have occurred, (y) the Agent shall have been paid in full for all fees, costs and expenses payable by TLGI or the Borrower under this Agreement and the other Loan Documents (including, without limitation, the fees and expenses of Mayer, Brown & Platt, counsel for the Agent) to the extent then invoiced, and (z) the Agent shall have received from the Borrower, with sufficient copies for the Agent and each of the Lenders, each of the following items in form and substance satisfactory to the Agent: (a) copies of the articles of incorporation or comparable constitutive documents of each of TLGI, the Borrower and each Pledgor Subsidiary identified on Schedule 4 hereto, together with all amendments, ---------- and, to the extent applicable, a certificate of good standing, in each case certified by the appropriate governmental officer in the relevant jurisdiction of organization (except that the articles of incorporation and comparable constitutive documents of each Pledgor Subsidiary instead may be certified by the Secretary (or another authorized officer) of such Pledgor Subsidiary), and copies of the by-laws (or any comparable constitutive laws, rules or regulations) of each of TLGI, the Borrower and each Pledgor Subsidiary identified on Schedule 4 hereto as in effect on the Effective ---------- Date certified by the Secretary, Assistant Secretary or other appropriate officer or director of it; (b) copies, certified by the Secretary, Assistant Secretary or other appropriate officer or director of each of TLGI, the Borrower and each Pledgor Subsidiary of its board of directors' resolutions (and resolutions of other bodies, if any are deemed necessary by counsel for any Lender) authorizing the execution and performance of the relevant Loan Documents; (c) incumbency certificates, executed by the Secretary or Assistant Secretary or other appropriate officer or director of each of TLGI, the Borrower and each Pledgor Subsidiary, which shall identify by name and title and bear the signature 48 of the officers of TLGI, the Borrower and such Pledgor Subsidiary authorized to sign the relevant Loan Documents and to make borrowings and apply for Letters of Credit hereunder, as applicable, upon which certificate the Agent, the Lenders and the L/C Issuer shall be entitled to rely until informed of any change in writing by TLGI, the Borrower or such Pledgor Subsidiary, as applicable; (d) a certificate, signed by the Chief Financial Officer, stating that on the date hereof no Default or Unmatured Default has occurred and is continuing; (e) the following opinions of counsel to the Borrower, TLGI, the other Guarantors and the Pledgor Subsidiaries regarding the matters set forth on Exhibit B and such other matters as the Agent shall request: --------- (i) an opinion of Thelen, Marrin, Johnson & Bridges, United States counsel to TLGI and the Borrower; (ii) an opinion of Russell & DuMoulin, Canadian counsel to TLGI; and (iii) opinions of counsel to each of the Pledgor Subsidiaries listed on Schedule 4 hereto (such counsel to be acceptable to the ---------- Agent); (f) written money transfer instructions, in substantially the form of Exhibit E hereto, addressed to the Agent and signed by an --------- Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested, which instructions shall, among other things, direct the Agent to repay in full (i) the loans and advances outstanding under all of the Existing Credit Agreements as of the Effective Date, together with all accrued and unpaid interest thereon and all breakage fees and other amounts payable with respect thereto and (ii) all commitment fees accrued and unpaid under all of the Existing Credit Agreements as of the Effective Date; (g) the Collateral Trust Agreement; (h) evidence that any and all guaranties and other contingent Obligation s of LFC and Neweol with respect to all liabilities of TLGI, the Borrower and each other Subsidiary arising under or in connection with the Note Agreements, the Existing Credit Agreements and any other obligations of TLGI and the Borrower have been fully released and terminated; (i) evidence that all commitments to extend credit under the Existing Credit Agreements shall have been terminated and that all obligations of TLGI, the Borrower and the other Subsidiaries arising thereunder or in connection therewith 49 shall be satisfied in full upon the payment by the Agent on behalf of the Borrower of the amounts described in Section 4.1(f); and -------------- (j) such other documents as the Agent or any Lender or its counsel may reasonably request. 4.2. Each Advance, Swing Line Loan and Letter of Credit. The Lenders -------------------------------------------------- shall not be required to make any Advance or purchase participations in any Swing Line Loan or Letter of Credit, the Swing Line Lender shall not be required to make any Swing Line Loan, and the L/C Issuer shall not be required to issue any Letter of Credit hereunder, unless on the applicable Revolving Loan Borrowing Date, Swing Line Loan Borrowing Date or date for issuance of such Letter of Credit (as applicable): (a) there exists no Default or Unmatured Default; (b) the representations and warranties contained in Article VI, the ---------- Guaranties and the Collateral Trust Agreement are true and correct as of such Revolving Loan Borrowing Date, Swing Line Loan Borrowing Date or date for issuance of such Letter of Credit (as applicable) except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date; and (c) after giving effect to such Advance, the making of such Swing Line Loan or the issuance of such Letter of Credit, the aggregate outstanding principal amount of all Advances and Swing Line Loans and the outstanding L/C Obligations does not exceed the Aggregate Commitment (and, (i) in the case of Swing Line Loans, (x) the aggregate outstanding principal amount of all such Swing Line Loans does not exceed $10,000,000, and (y) the aggregate outstanding principal amount of all such Swing Line Loans, together with the outstanding principal amount of all Revolving Loans made by the Swing Line Lender in its capacity as a Lender and the L/C Interest of the Swing Line Lender in its capacity as the L/C Issuer, does not exceed the Commitment applicable to the Swing Line Lender in its capacity as a Lender, and (ii) in the case of Letters of Credit, the aggregate outstanding L/C Obligations do not exceed $100,000,000). Each Revolving Loan Borrowing Notice with respect to an Advance, Swing Line Loan Borrowing Notice with respect to a Swing Line Loan, and application with respect to a Letter of Credit shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(a), (b) and (c) have been --------------- --- --- satisfied. 50 ARTICLE V TLGI GUARANTY 5.1. The Guaranty. TLGI hereby unconditionally and irrevocably ------------ guarantees the due and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Revolving Loan and Swing Line Loan made to, and of each Reimbursement Obligation owing by, the Borrower pursuant to this Agreement, and the due and punctual payment and performance of all other Obligations (including, without limitation, interest accruing following the filing of a bankruptcy petition by or against the Borrower, at the applicable rate or rates specified herein, whether or not such interest is allowed as a claim in bankruptcy). Upon failure by the Borrower to pay or perform any Obligation, TLGI shall forthwith on demand pay or perform such Obligation, at the place, in the manner and with the effect otherwise specified in this Agreement. TLGI hereby agrees that its guaranty of the Obligations pursuant to this Article V is an absolute guaranty of payment and is --------- not a guaranty of collection. 5.2. Guaranty Unconditional. The obligations of TLGI hereunder shall ---------------------- be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement or any Letter of Credit or the exchange, release or non-perfection of any collateral security therefor (including, without limitation, the collateral pledged under the Collateral Trust Agreement); (b) any modification or amendment of or supplement to this Agreement, any Letter of Credit, the Collateral Trust Agreement, or any other Loan Document, or the termination of the Collateral Trust Agreement or the release of any collateral pledged thereunder; (c) any change in the corporate existence, structure or ownership of the Borrower or any other Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower, any other Subsidiary or their respective assets; (d) the existence of any claim, set-off or other rights which TLGI may have at any time against the Borrower, any other Guarantor, the Agent, any Lender, the L/C Issuer or any other Person, whether in connection herewith or with any unrelated transactions, provided that nothing herein -------- shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; 51 (e) any invalidity or unenforceability relating to or against the Borrower or any Pledgor Subsidiary for any reason of any provision or all of this Agreement, the Collateral Trust Agreement, or any other Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Revolving Loan or Swing Line Loan or Reimbursement Obligation or the payment or performance by the Borrower of any other Obligation hereunder or under any of the other Loan Documents or the payment or performance by any Guarantor of any of its obligations under any Guaranty; or (f) any other act or omission to act or delay of any kind by the Borrower, any other Guarantor, the Agent, any Lender, the L/C Issuer or any other Person or any other circumstance whatsoever which might, but for the provisions of this Section 5.2, constitute a legal or equitable discharge ----------- of TLGI's obligations hereunder 5.3. Discharge Only Upon Payment in Full; Reinstatement in Certain ------------------------------------------------------------- Circumstances. TLGI's obligations hereunder shall remain in full force and - ------------- effect until the principal of and interest on the Revolving Loans and the Swing Line Loans and all other Obligations shall have been paid or performed in full and the Letters of Credit shall have expired or otherwise been terminated and shall survive the Facility Termination Date. If at any time any payment of the principal of or interest on any Revolving Loan or Swing Line Loan or Reimbursement Obligation or any payment of any other Obligation hereunder is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or any other Person or otherwise, TLGI's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. 5.4. Waiver by TLGI. TLGI irrevocably waives acceptance hereof, -------------- presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any right be exhausted or any action be taken by the Agent, any Lender, the L/C Issuer or any other Person against the Borrower, any Guarantor or any other Person or any collateral security (including, without limitation, the collateral pledged under the Collateral Trust Agreement). In addition, the Lenders and the L/C Issuer, either themselves or acting through the Agent, are hereby authorized, without notice or demand and without affecting the liability of TLGI hereunder, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the Obligations, or to otherwise modify, amend or change the terms of any of the Loan Documents; (b) to accept partial payments on all or any part of the Obligations; (c) to take and hold security or collateral (including, without limitation, the collateral pledged under the Collateral Trust Agreement) for the payment of all or any part of the Obligations, TLGI's obligations hereunder or any other guaranties of all or any part of the Obligations or other liabilities of the Borrower; (d) to exchange, enforce, waive and release any such security or collateral; (e) to apply such security or collateral and direct the order or manner of sale thereof as in their discretion they may determine; and (f) to settle, release, exchange, 52 enforce, waive, compromise or collect or otherwise liquidate all or any part of the Obligations, TLGI's obligations hereunder, any other guaranty of all or any part of the Obligations and any security or collateral for the Obligations or for any such guaranty. Any of the foregoing may be done in any manner, without affecting or impairing the obligations of TLGI hereunder. 5.5. Waiver of Subrogation Rights. Until all Obligations shall have ---------------------------- been indefeasibly paid in full, the Commitments shall have terminated and all of the Letters of Credit shall have expired or otherwise been terminated, TLGI hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, as amended, or otherwise) to the claims of the Lenders, the L/C Issuer and the Agent against the Borrower and all contractual, statutory or common law rights of reimbursement, contribution or indemnification from the Borrower and all "claims" (as such term is defined in the United States Bankruptcy Code, as amended) against the Borrower, which, in any such case, may otherwise have arisen in connection with this Agreement and the other Loan Documents. 5.6. Stay of Acceleration. In the event that acceleration of the -------------------- time for payment of any of the Obligations hereunder is stayed upon the insolvency, bankruptcy or reorganization of the Borrower or any other Person, all such Obligations otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by TLGI hereunder forthwith on demand by the Agent for the account of the Lenders, the L/C Issuer and the Agent. 5.7. Gross-up. All payments made by TLGI under this Article V shall -------- --------- be made in full, without set-off or counterclaim, and free of and without deduction or withholding for or on account of any present or future tax, duty, assessment, impost, levy or other similar charge, or any penalties, fines or interest thereon (a "Relevant Tax") imposed upon TLGI, the Borrower, the Agent, ------------ any Lender or the L/C Issuer by the government of Canada (or any Governmental Authority thereof), the government of the United States of America (or any Governmental Authority thereof) or by the government of any other country or jurisdiction (or any Governmental Authority thereof) from or through which payments hereunder are actually made (each a "Taxing Jurisdiction"). TLGI, for ------------------- the benefit of the Agent, the Lenders and the L/C Issuer, agrees that in the event any payments made by TLGI hereunder are subject to any deduction or withholding for or on account of any Relevant Tax, TLGI will pay to the Agent, such Lender or the L/C Issuer such additional amounts as may be necessary in order that the net amounts paid to the Agent, such Lender or the L/C Issuer pursuant to the terms of this Article V after imposition of any such Relevant --------- Tax (including deductions or withholdings applicable to additional amounts paid under this Section 5.7) shall be not less than the amounts specified in this ----------- Article V to be then due and payable, except that no such additional amounts - --------- shall be payable hereunder to the Agent, any Lender or the L/C Issuer that is liable for such Relevant Tax in respect of the relevant payment solely by reason of such recipient (a) having a permanent establishment in the 53 Taxing Jurisdiction, (b) being organized under the laws of the Taxing Jurisdiction or any political subdivision thereof, (c) being resident in the Taxing Jurisdiction by virtue of its domicile or place of management being in the Taxing Jurisdiction, or (d) having failed to comply with the terms and conditions of Section 2.17(a) applicable to it. If the Agent, any Lender or the --------------- L/C Issuer pays any amount in respect of Relevant Tax, TLGI shall indemnify the Agent, the Lender or the L/C Issuer, as the case may be, for such payment within 15 days of demand therefor by the Agent, such Lender or the L/C Issuer (in the case of such Lender or the L/C Issuer, made through the Agent). ARTICLE VI REPRESENTATIONS AND WARRANTIES 6. Representations and Warranties. Each of TLGI and, with respect ------------------------------ to itself and its Subsidiaries, the Borrower represents and warrants to the Lenders and the L/C Issuer that: 6.1. Corporate Existence and Standing. Each of TLGI, the Borrower -------------------------------- and the other Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction wherein such qualification is required, except to the extent that, in the case of any Subsidiary other than the Borrower or any Pledgor Subsidiary, the failure to be in good standing or authorized to conduct business in any jurisdiction could not, when taken together with all similar failures by such Subsidiary and each other Subsidiary, reasonably be expected to have a Material Adverse Effect. 6.2. Authorization and Validity. Each of TLGI, the Borrower and each -------------------------- other Guarantor has the corporate power and authority and legal right to execute and deliver the Loan Documents to which it is party and to perform its obligations thereunder. The execution and delivery by each of TLGI, the Borrower and each other Guarantor of the Loan Documents to which it is party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and each Loan Document to which TLGI, the Borrower or any other Guarantor is party constitutes the legal, valid and binding obligation of TLGI, the Borrower or such other Guarantor, as applicable, enforceable against TLGI, the Borrower or such other Guarantor, as applicable, in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and general principles of equity, regardless of whether the application of such principles is considered in a proceeding in equity or at law. 6.3. No Conflict; Government Consent. Neither the execution and ------------------------------- delivery by each of TLGI, the Borrower and each other Guarantor of the Loan Documents to which it is party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof, will violate any law, rule, regulation, order, writ, judgment, 54 injunction, decree or award binding on TLGI, the Borrower or any Subsidiary or TLGI's, the Borrower's or any Subsidiary's articles of incorporation or by-laws or comparable constitutive documents or the provisions of any indenture, instrument or agreement to which TLGI, the Borrower or any Subsidiary is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of TLGI, the Borrower or any Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents, except for consents, approvals, authorizations and filings which have already been duly obtained and made and which remain valid and in full force and effect. 6.4. Financial Statements. Each of (a) the December 31, 1995, -------------------- consolidated financial statements of TLGI and its Subsidiaries and (b) the December 31, 1995, consolidated financial statements of the Borrower and its Subsidiaries, heretofore delivered to the Lenders, were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of TLGI and its Subsidiaries and of the Borrower and its Subsidiaries, respectively, at the date thereof and the consolidated results of their respective operations for the period then ended. 6.5. Material Adverse Change. Since December 31, 1995, there has ----------------------- been no change in the business, Property, prospects, financial condition or results of operations of TLGI and its Subsidiaries (taken as a whole) or of the Borrower and its Subsidiaries (taken as a whole) which could reasonably be expected to have a Material Adverse Effect. 6.6. Taxes. All income tax returns required to be filed by TLGI, the ----- Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, all such tax returns have been prepared in accordance with applicable laws and all taxes, assessments, fees and other governmental charges upon TLGI, the Borrower or any Subsidiary or upon any of their respective properties, income or franchises which are shown on such returns have been paid. For all taxable years ending on or before December 31, 1989, the United States Federal income tax liability of TLGI, the Borrower and the other Subsidiaries has been satisfied and either the period of limitations on assessment of additional United States Federal income tax has expired or TLGI, the Borrower or the applicable other Subsidiary has entered into an agreement with the United States Internal Revenue Service closing conclusively the total tax liability for the taxable year. None of TLGI, the Borrower and the other Subsidiaries knows of any proposed additional tax assessment against it or any of them for which adequate provision has not been made on its or their accounts, and no material controversy in respect of additional income or other taxes due or claimed to be due to any Governmental Authority is pending or to the knowledge of TLGI, the Borrower or the other Subsidiaries threatened. 55 The charges, accruals and reserves on the books of TLGI, the Borrower and the other Subsidiaries in respect of any taxes or other governmental charges are adequate. 6.7. Litigation and Contingent Liabilities. Except as set forth on ------------------------------------- Schedule 1 hereto (but only to the extent described thereon), there is no - ---------- litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting TLGI, the Borrower or any other Subsidiary which could have a Material Adverse Effect, or for which there is a reasonable likelihood that TLGI, the Borrower or any other Subsidiary would make a payment, whether in settlement or otherwise, in excess of $50,000,000. Other than any liability incident to such litigation, arbitration or proceedings, none of TLGI, the Borrower or any other Subsidiary has any material contingent liabilities not provided for or disclosed in the financial statements referred to in Section 6.4. ----------- 6.8. Subsidiaries; Pledge of Stock. Schedule 1 hereto, together with ----------------------------- ---------- the most recent update, if any, delivered pursuant to Section 7.1(k), contains -------------- an accurate list of all of the Subsidiaries (except for inactive Subsidiaries with immaterial assets and liabilities) of each of TLGI and the Borrower, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by TLGI, the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock of the Subsidiaries of TLGI and the Borrower listed on Schedule 1 hereto, together with ---------- the most recent update, if any, delivered pursuant to Section 7.1(k), have been -------------- duly authorized and issued and are fully paid and non-assessable and have been duly and validly pledged under the Collateral Trust Agreement and delivered to the Collateral Agent pursuant to the terms of the Collateral Trust Agreement. 6.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do ----- not in the aggregate exceed $1,000,000. Neither TLGI, the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $5,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, none of TLGI, the Borrower or any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. No contribution failure has occurred with respect to any Single Employer Plan sufficient to give rise to a lien under section 302(f) of ERISA. Each Canadian Plan is registered under, and is in compliance with, the Income Tax Act (Canada), applicable provincial pensions legislation and all other applicable requirements of law and regulations and all reports, returns and filings required to be made thereunder have been made. The Canadian Plans have been at all times administered in accordance with their terms and the provisions of all applicable requirements of law and regulations. There are no unfunded liabilities under the Canadian Plans and, without limiting the generality of the foregoing, there is no going concern unfunded actuarial liability, past service unfunded actuarial liability or solvency deficiency. 56 Neither TLGI nor any Subsidiary has received any payment of surplus from any of the Canadian Plans, other than payments received after January 1, 1988 with the approval of all necessary pension regulatory and taxation authorities. 6.10. Accuracy of Information. No written information, exhibit or ----------------------- report prepared and furnished by TLGI, the Borrower or any other Subsidiary to the Agent, any Lender or the L/C Issuer in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 6.11. Regulation U. Margin stock (as defined in Regulation U) ------------ constitutes less than 25% of those assets of TLGI and the Borrower and other Subsidiaries which are subject to any limitation on sale, pledge or other restriction hereunder or under any other Loan Document. None of the execution, delivery and performance of this Agreement and the other Loan Documents by TLGI, the Borrowers, the other Guarantors and the Pledgor Subsidiaries will violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 6.12. Material Agreements. None of TLGI, the Borrower or any ------------------- Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could have a Material Adverse Effect. 6.13. Compliance With Laws. TLGI, the Borrower and the other -------------------- Subsidiaries have complied in all material respects with all applicable statutes, rules, regulations, orders and restrictions of any Governmental Authority having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property the failure with which to comply could have a Material Adverse Effect. None of TLGI, the Borrower or any Subsidiary has received any notice to the effect that, or is otherwise aware that, its operations are not in material compliance with any of the requirements of applicable environmental, health and safety statutes and regulations of any Governmental Authority or the subject of any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could have a Material Adverse Effect. 6.14. Ownership of Properties. Except as set forth on Schedule 1 ----------------------- ---------- hereto, on the date of this Agreement, each of TLGI, the Borrower and each other Subsidiary has good title, free of all Liens other than those permitted by Section 7.18, to all of the Property and assets reflected as owned by it in the - ------------ financial statements delivered from time to time pursuant hereto. 57 6.15. Investment Company Act. None of TLGI, the Borrower or any other ---------------------- Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 6.16. Public Utility Holding Company Act. None of TLGI, the Borrower ---------------------------------- or any other Subsidiary is a "holding company" or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.17. Post-Retirement Benefits. The present value of the expected ------------------------ cost of post-retirement medical and insurance benefits payable by TLGI, the Borrower and the other Subsidiaries to their employees and former employees, as estimated by TLGI in accordance with procedures and assumptions specified by the Required Lenders, or in the absence of such specification, deemed prudent and reasonable by TLGI, does not exceed $1,000,000. 6.18. Negative Pledge. None of TLGI, the Borrower nor any Subsidiary --------------- of TLGI or the Borrower is party to any contract or other arrangement under the terms of which TLGI, the Borrower or any such Subsidiary is restricted from (i) performing its respective obligations under the Collateral Trust Agreement or any other Loan Document to which it is a party or (ii) providing a guaranty to the Agent, the Collateral Agent, the Lenders or the L/C Issuer. 6.19. Solvency. On the date of this Agreement, on the Effective Date, -------- and immediately prior to and after giving effect to the issuance of each Letter of Credit and the making of each Advance and Swing Line Loan hereunder and the application of the proceeds of each Advance and Swing Line Loan, each of TLGI, the Borrower and each Pledgor Subsidiary is solvent, is able to pay its debts as they mature, owns property with fair saleable value greater than the amount required to pay its debts and has capital sufficient to carry on its business as then constituted. 6.20. Debt Offering and Equity Placement. The Debt Offering has been ---------------------------------- consummated in compliance with all laws, and not less than $200,000,000 of net proceeds has been raised and unconditionally received by the Borrower in connection therewith, and the Equity Placement has been consummated in compliance with all laws, and not less than C$150,000,000 of net proceeds has been raised and unconditionally received by the Borrower in connection therewith. 58 ARTICLE VIII COVENANTS 7. Covenants. During the term of this Agreement, unless the --------- Required Lenders shall otherwise consent in writing, TLGI and the Borrower shall perform, and cause to be performed, the following: 7.1. Financial Reporting. TLGI will maintain, and cause the Borrower ------------------- and each other Subsidiary to maintain, a system of accounting established and administered in accordance with GAAP, and will furnish or cause to be furnished to the Lenders: (a) (i) within 120 days after the close of each of TLGI's fiscal years, (x) together with an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in GAAP and required or approved by TLGI's independent chartered accountants or independent public accountants) audit report certified by independent chartered accountants or independent public accountants, acceptable to the Lenders, consolidated financial statements of TLGI prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related statements of profit and loss, retained earnings and changes in financial position, accompanied by a review engagement report of said accountants in accordance with the standards of Section 8600 of the CICA Handbook stating that, in connection with the foregoing, they have obtained no knowledge of any failure of TLGI or its Subsidiaries to comply with the requirements specified in each of Sections 7.10 through 7.26, or if, in the ------------- ---- opinion of such accountants, TLGI or any of its Subsidiaries has failed to comply with the requirements specified in any such Section, stating the nature and status of such failure, and (y) consolidating financial statements of TLGI certified by the Chief Financial Officer that separately present TLGI's Canadian operations, United States operations and other material financial operations prepared in accordance with Agreement Accounting Principles, including balance sheets as of the end of such period, and related statements of profit and loss, retained earnings and changes in financial position; and (ii) within 180 days after the close of each of TLGI's fiscal years, the management letter prepared by the applicable accountants in connection with the financial statements for such fiscal year delivered pursuant to the foregoing clause (i)(x); ------------- (b) (i) within 120 days after the close of each of the Borrower's fiscal years, together with an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in GAAP and required or approved by the Borrower's independent chartered accountants or independent public accountants) audit report certified by independent chartered accountants or independent public accountants, acceptable to the Lenders, consolidated financial statements of the Borrower prepared in accordance with Agreement Accounting 59 Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, and related statements of profit and loss, retained earnings and changes in financial position; (c) within 60 days after the close of each of the first three quarterly periods of each of TLGI's fiscal years, for TLGI and its Subsidiaries, consolidated unaudited balance sheets as at the close of such period and consolidated statements of profit and loss, retained earnings and changes in financial position for the period from the beginning of such fiscal year to the end of such period, all certified by the Chief Financial Officer; (d) within 60 days after the close of each of the first three quarterly periods of each of the Borrower's fiscal years, for the Borrower and its Subsidiaries, consolidated unaudited balance sheets as at the close of such period and consolidated statements of profit and loss, retained earnings and changes in financial position for the period from the beginning of such fiscal year to the end of such period, all certified by the Chief Financial Officer; (e) together with the financial statements required pursuant to the foregoing clauses (a), (b), (c) and (d), a compliance certificate in ----------- --- --- --- substantially the form of Exhibit C hereto signed by the Chief Financial --------- Officer showing in reasonable detail the calculations necessary to determine compliance with this Agreement, stating that no Default or Unmatured Default exists or if any Default or Unmatured Default exists, stating the nature and status thereof, and otherwise providing the information required thereby; (f) within 270 days after the close of each fiscal year of TLGI, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA; (g) as soon as possible and in any event within ten days after TLGI or the Borrower knows that any Reportable Event has occurred with respect to any Plan or that a withdrawal has occurred from any Multiemployer Plan, the occurrence of either of which may reasonably be expected to give rise to a Material Adverse Effect, or that a contribution failure has occurred with respect to any Single Employer Plan sufficient to give rise to a lien under section 302(f) of ERISA, a statement, signed by the Chief Financial Officer, describing said Reportable Event or contribution failure and the action which TLGI and the Borrower propose to take with respect thereto; (h) as soon as possible and in any event within 30 days after receipt by TLGI or any of its Subsidiaries, a copy of (i) any notice or claim to the effect that TLGI or any of its Subsidiaries is or may reasonably be expected to be liable for $2,000,000 or more of potential liability (when aggregated with other similar potential 60 liability) to any Person as a result of the release by TLGI, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment and (ii) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by TLGI or any of its Subsidiaries, which violation could reasonably be expected to give rise to a Material Adverse Effect; (i) promptly upon the furnishing thereof to the shareholders of TLGI, copies of all financial statements, reports and proxy statements so furnished; (j) promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by TLGI or the Borrower to stockholders generally (excluding those statements, reports and notices sent by the Borrower to TLGI which are not sent to TLGI solely in its capacity as a stockholder) and of each regular report and any registration statement or prospectus filed by TLGI, the Borrower or any other Subsidiary with the Ontario Securities Commission, the Toronto Stock Exchange, the British Columbia Securities Commission, the United States Securities and Exchange Commission or any successor agency to any of the foregoing or any other Canadian or United States federal or state or provincial securities exchange or securities trading system or with any United States or Canadian national stock exchange and one copy of each periodic report filed by TLGI with any Canadian regulatory authority, in all cases without duplication; provided, however, that neither -------- ------- TLGI nor the Borrower shall be obligated to provide to the Lenders routine reports which are required to be provided to any of the above-listed entities concerning the management of employee benefit plans, including, without limitation, stock purchases or the exercise of stock options made under any such employee benefit plan; (k) together with the financial statements delivered pursuant to Section 7.1(a), a current list of all of the Subsidiaries of each of TLGI -------------- and the Borrower, setting forth their respective jurisdictions of incorporation, the percentage of their respective capital stock owned by TLGI, the Borrower and the other Subsidiaries, and the net worth (after adjustments for intercompany balances) determined by TLGI on a consistent basis of each such Subsidiary as of a date reasonably proximate to the date of such list (which list shall note with respect to each Subsidiary any changes of greater than $5,000,000 in such net worth of such Subsidiary since the date of the last list of Subsidiaries delivered pursuant to this Section 7.1(k)); -------------- (l) so long as the WLSP Contingent Obligation shall be outstanding, together with the financial statements delivered pursuant to Sections -------- 7.1(a), 7.1(b), 7.1(c) and 7.1(d), a report specifying the Class B Invested ------ ------ ------ ------ Amount as of the end of such calendar quarter; 61 (m) together with the financial statements delivered pursuant to Sections 7.1(a), (b), (c) and (d), a summary prepared by an Authorized --------------- --- --- --- Officer of TLGI setting forth the status of all Acquisitions by TLGI, the Borrower or any of their respective Subsidiaries for which (i) a letter of intent (or other documentation evidencing the intent of the parties to proceed with such Acquisition, including, without limitation, a definitive purchase agreement) has been executed by the parties during the period covered by such financial statements and continuing through the date of such summary, or (ii) such Acquisition has closed or otherwise been consummated during the period covered by such financial statements and continuing through the date of such summary, which summary shall include (x) a statement of the aggregate consideration paid to date and expected to be paid at any time thereafter in connection with such Acquisitions, calculated separately for the matters described in the foregoing clauses ------- (i) and (ii), and (y) a list of all Acquisitions for which a provision --- ---- subjecting the parties to arbitration was not contained in the documentation governing the Acquisition; (n) together with the financial statements delivered pursuant to Sections 7.1(a), (b), (c) and (d), a detailed summary prepared by an Authorized Officer of TLGI (x) specifying all committed lines of credit to which any of TLGI, the Borrower or any Subsidiary of TLGI or the Borrower is party as of the date of such summary, identifying the total commitment and total outstandings under each such line of credit and the purpose thereof, and stating whether such lines of credit are purportedly secured under the terms of the Collateral Trust Agreement or otherwise, and (y) identifying each Finance Subsidiary which has been formed since the date of the last summary delivered pursuant to this Section 7.1(n), and describing -------------- any material changes in the capitalization, assets, or business and activities of each Finance Subsidiary since the date of the last summary delivered pursuant to this Section 7.1(n); and -------------- (o) promptly, such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 7.2. Use of Proceeds. The Borrower will, and will cause each of its ---------------- Subsidiaries to, use the proceeds of the Advances and the Swing Line Loans to repay all outstanding loans and advances made under any or all of the Existing Credit Agreements and other Indebtedness identified on Annex 1 of Schedule 1 ---------- hereto under the heading "Indebtedness to be Paid", to repay Advances and Swing Line Loans, to make Permitted Acquisitions or for general corporate and working capital purposes. The Borrower will not, nor will it permit any of its Subsidiaries to, use any of the proceeds of the Advances or the Swing Line Loans to purchase or carry any "margin stock" (as defined in Regulation U). TLGI will not, nor will it permit any Subsidiary, to use proceeds of the Advances or the Swing Line Loans other than as contemplated in this Section 7.2. ----------- 62 7.3. Notices of Default, Litigation, Etc. TLGI and the Borrower will ----------------------------------- give notice in writing to the Lenders of the occurrence of (a) any Default or Unmatured Default, (b) any payment, or any group of payments (whether or not related), whether in settlement or otherwise, in excess of $50,000,000, which a t any time are expected to be made at or after such time by TLGI, the Borrower or any Subsidiary in connection with any litigation, arbitrations, governmental investigations, proceedings or inquiries, whether individually or in the aggregate (it being understood that TLGI and the Borrower, in lieu of separately identifying each such expected payment, may group such payments to the extent deemed necessary to protect confidentiality), (c) any development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect, and (d) any change in the practices and procedures of TLGI and the Borrower in effect on the date of this Agreement regarding acquisitions and litigation (which practices and procedures have been described prior to the date of this Agreement by representatives of TLGI and the Borrower to the Agent and the Lenders) which notice, in each of the foregoing cases, shall be given promptly and in any event within five Business Days after TLGI, the Borrower or the relevant Subsidiary becomes aware of the Default, Unmatured Default, payment, development, determination or change. Together with the financial statements delivered pursuant to Sections 7.1(a), (b), (c) and (d), TLGI and the Borrower --------------- --- --- --- shall provide to the Agent (with sufficient copies for each Lender) a report, prepared as of the last day of each calendar quarter, (x) identifying in reasonable detail all litigation, arbitrations, governmental investigations and proceedings pending or, to the knowledge of any Authorized Officer, threatened against or affecting TLGI, the Borrower or any other Subsidiary for which the claim or matter involves an amount in excess of $1,000,000, (y) for all such litigation, arbitrations, governmental investigations and proceedings for which the claim or matter involves an amount in excess of $10,000,000, briefly summarizing the matter (including whether resolution of the matter could come before a jury), identifying the relief sought and the amount of the claim, and specifying whether the claim is covered by insurance, and (z) identifying in reasonable detail each payment in excess of $1,000,000 made during such calendar quarter, or expected to be made thereafter, in settlement of, or otherwise in satisfaction of, any litigation, arbitrations, governmental investigations, proceedings or inquiries. TLGI and the Borrower agree to discuss with the Agent and the Lenders, upon the request of the Agent or any Lender, the status of any litigation, arbitrations, governmental investigations, proceedings and inquiries and any settlements thereof. 7.4. Conduct of Business. TLGI and the Borrower will, and will cause -------------------- each respective Subsidiary of it to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is conducted on the date of this Agreement and to do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business requires it to be so authorized. 63 7.5. Taxes. TLGI and the Borrower will, and will cause each ------ respective Subsidiary of it to, pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP. 7.6. Insurance. TLGI and the Borrower will, and will cause each ---------- respective Subsidiary of it to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is customary in the industries in which TLGI, the Borrower and such Subsidiaries are engaged and which is consistent with sound business practice; provided, however, that, in any event, TLGI and the Borrower will -------- ------- maintain, and cause each respective Subsidiary of it to maintain, at all times insurance which, in the aggregate, is not materially less comprehensive in scope and policy amount than the insurance maintained by them collectively as of the date hereof. TLGI and the Borrower will furnish to any Lender upon request from time to time full information as to the insurance carried. 7.7. Compliance with Laws. TLGI and the Borrower will, and will --------------------- cause each respective Subsidiary of it to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it or its Properties may be subject. 7.8. Maintenance of Properties. TLGI and the Borrower will, and will ------------------------- cause each respective Subsidiary of it to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, ordinary wear and tear excepted, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 7.9. Inspection. TLGI and the Borrower will, and will cause each ---------- respective Subsidiary of it to, permit the Agent and any or each Lender, by its respective representatives and agents, to inspect any of the Property, corporate books and financial records of TLGI, the Borrower and each such Subsidiary, to examine and make copies of the books of accounts and other financial records of TLGI, the Borrower and each such Subsidiary, and to discuss the affairs, finances and accounts of TLGI, the Borrower and each such Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or such Lender may designate. 7.10. Distributions. TLGI and the Borrower will not, nor will either ------------- permit any Subsidiary of it to, declare or make or incur any liability to make any Distribution, except: (a) dividends payable in the capital stock of TLGI, the Borrower or such Subsidiary; 64 (b) Distributions to TLGI, a Regional Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner; (c) Distributions made by an SPV to TLGI, the Borrower or a Subsidiary in connection with a Permitted Receivables Securitization; and (d) other Distributions (in addition to those described in the foregoing clauses (a) and (b)) so long as, immediately after giving effect ----------- ---- to declaration thereof in the case of dividends or the making thereof in the case of other proposed Distributions (the date of such event being referred to hereinafter as the "Distribution Date"), (i) the aggregate ----------------- amount of Distributions declared in the case of dividends or made in the case of other Distributions pursuant to this clause (d), during the period ---------- from and after January 1, 1996, to and including the Distribution Date, would not exceed the Consolidated Distributable Amount as of the Distribution Date, and (ii) no Default or Unmatured Default shall have occurred and be continuing. For the purposes of making the foregoing computations, the amount of any Distribution declared, paid or distributed in property or assets of TLGI or the Borrower or any other Subsidiary shall be deemed to be the greater of the book value or Fair Value (as determined in good faith by the board of directors of TLGI) of such property or assets as of the date of declaration in the case of a dividend and the date of payment in the case of any other Distribution. 7.11. Indebtedness. TLGI and the Borrower will not, nor will either ------------- permit any Subsidiary of it to, create, incur or suffer to exist any Indebtedness, except: (a) the Revolving Loans, the Swing Line Loans and the L/C Obligations; (b) Indebtedness (i) existing as of the close of business on December 31, 1995, and described in Schedule 1 hereto or (ii) incurred on ---------- or after January 1, 1996, but only to the extent expressly described on Schedule 1 hereto; ---------- (c) Rentals other than Capitalized Lease Obligations and Synthetic Lease Obligations; (d) Indebtedness of TLGI, the Borrower or any Subsidiary of TLGI owing to TLGI, the Borrower or any Subsidiary of TLGI; (e) subject to the final paragraph of this Section 7.11 (measured at ------------ the time of initial investment by a purchaser or other investor in Receivables Program Assets, but not at the time of reinvestment of proceeds thereof in other Receivables Program Assets), Indebtedness of TLGI, the Borrower or any Subsidiary in connection with a Permitted Receivables Securitization; 65 (f) subject to the final paragraph of this Section 7.11, additional ------------ Indebtedness of any Subsidiaries of TLGI (other than the Borrower), provided that such Indebtedness, when added to the aggregate outstanding Indebtedness of all such Subsidiaries which is described on Schedule 1 ---------- hereto, does not at any time exceed 10.0% of Consolidated Net Worth at such time; and (g) subject to the final paragraph of this Section 7.11, additional ------------ Indebtedness issued or incurred by TLGI or the Borrower, provided that after giving effect thereto and to the application of the proceeds thereof, Consolidated Indebtedness would not exceed 60% of Consolidated Capitalization. Notwithstanding the foregoing, but subject to the last two sentences of this paragraph, any Indebtedness otherwise permitted under any of the foregoing Sections 7.11(e), (f) and (g) shall not be permitted unless at the ----------------- --- --- time of the incurrence of such Indebtedness, and after giving pro forma effect --------- thereto, the Consolidated Fixed Charges Coverage Ratio is at least equal to 2.25:1.00. (The acquisition by TLGI or any of its Subsidiaries of a new Subsidiary which is obligated in respect of any Indebtedness shall be deemed for purposes of this Section to be the incurrence of such Indebtedness by such new Subsidiary on the date it becomes a Subsidiary of TLGI.) During any period of time that (i) the ratings assigned to the senior unsecured and unenhanced long- term Indebtedness of TLGI by each of Standard & Poor's and Moody's (collectively, the "Rating Agencies") are no less than BBB- and Baa3, --------------- respectively (the "Investment Grade Ratings"), and (ii) no Default or Unmatured ------------------------ Default has occurred and is continuing, the restriction contained in the first sentence of this paragraph shall not be applicable. If one or both Rating Agencies withdraws its rating or downgrades its Investment Grade Rating, then thereafter the restriction contained in the first sentence of this paragraph shall be applicable on a prospective basis until both of the Rating Agencies thereafter assign Investment Grade Ratings to the senior unsecured and unenhanced long-term Indebtedness of TLGI. 7.12. Merger. TLGI and the Borrower will not, nor will either permit ------ any Subsidiary of it to, merge, amalgamate or consolidate with or into any other Person, except that (a) a Subsidiary (other than the Borrower) may merge with TLGI, the Borrower, a Regional Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner, subject to the further condition that if TLGI or the Borrower is a party to any such permitted merger, TLGI or the Borrower, as applicable, shall be the surviving corporation and (b) a Regional Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner incorporated under the laws of Canada or any Province thereof may amalgamate with another Regional Partner or Wholly- Owned Subsidiary of TLGI or a Regional Partner incorporated under the laws of Canada or any Province thereof, it being understood that neither TLGI nor the Borrower may so amalgamate. 7.13. Sale of Assets. TLGI and the Borrower will not, nor will either -------------- permit any Subsidiary of it to, lease, sell or otherwise dispose of its Property to any other Person 66 except for (a) sales of inventory in the ordinary course of business, (b) leases, sales or other dispositions of its Property to a Regional Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner (provided that if any such Property is subject to the Collateral Trust Agreement, then such lease, sale or other disposition shall be permissible hereunder only to the extent that the lessee or transferee thereof shall have executed documentation satisfactory to the Agent maintaining the security interest in the Property in favor of the Collateral Agent for the benefit of the Secured Parties), (c) subject to the requirements of Section 2.10(b) hereof, other sales or other dispositions of its --------------- Property subject to the requirement that the net proceeds of each such sale or other disposition of Property are reinvested, within 180 days following consummation of such sale or other disposition, in the business of TLGI, the Borrower and the Subsidiaries of either as conducted in accordance with the requirements of Section 7.4, and that immediately before and after giving ----------- effect to such sale, no Default or Unmatured Default shall have occurred and be continuing, (d) Permitted Receivables Securitizations, and (e) sales of cemetery properties (provided that such sales (i) are on commercially reasonable terms, (ii) occur within 30 days of the acquisition by TLGI, the Borrower or a Subsidiary of such cemetery property, (iii) give rise to an Investment of the type described in, and permitted by, Section 7.16(m), and (iv) do not involve --------------- cemetery properties with an aggregate Fair Value in excess of $50,000,000 for all such cemetery properties sold in any calendar year). 7.14. Prepayments. TLGI and the Borrower will not, nor will either ----------- permit any Subsidiary of it to, either directly or indirectly, voluntarily redeem, retire or otherwise pay prior to its scheduled maturity, or accelerate the maturity of, Indebtedness of TLGI or the Borrower or any such Subsidiary, other than (a) Indebtedness arising hereunder or under other credit facilities or Permitted Receivables Securitizations of a revolving nature, (b) Indebtedness between or among TLGI, the Borrower or any Subsidiary, (c) Indebtedness arising under the MEIP Credit Agreement (but only to the extent prepayments or redemptions thereof are made in accordance with the requirements of the MEIP Credit Agreement which are contained in the MEIP Credit Agreement as in effect on the date hereof), and (d) other Indebtedness so long as such Indebtedness either (i) (A) was incurred in connection with an Acquisition and (B) is prepaid within 180 days of the closing of such Acquisition or (ii) (A) is prepaid in full and (B) does not exceed $10,000,000 (such limitation to apply to each individual prepayment pursuant to this clause (ii) and not in the aggregate). 7.15. Affiliates. TLGI and the Borrower will not, nor will either ---------- permit any Subsidiary of it to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of TLGI's, the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to TLGI, the Borrower or such Subsidiary than TLGI, the Borrower or such Subsidiary would obtain in a comparable arm's-length transaction; provided, however, that -------- ------- the foregoing terms of this Section 7.15 shall not apply to (i) transactions ------------ between or among 67 TLGI, any Wholly-Owned Subsidiary of TLGI and any Regional Partner and (ii) transactions with an SPV which are related to a Permitted Receivables Securitization. 7.16. Investments. TLGI and the Borrower will not, nor will either ----------- permit any Subsidiary of it to, make or suffer to exist any Investments, or commitments therefor, except: (a) Investments (i) in existence as of the close of business on December 31, 1995, and described in Schedule 1 hereto or (ii) arising on or ---------- after January 1, 1996, but only to the extent expressly described on Schedule 1 hereto; ---------- (b) Investments by TLGI or the Borrower or any Subsidiary in and to (i) any Subsidiary (other than LMIC or any other Subsidiary not engaged in one or more of the TLGI Lines of Business), including any Investment in a corporation which, after giving effect to such Investment, will become a Subsidiary (other than as specified in the foregoing parenthetical), (ii) LMIC, but only to the extent of the aggregate initial par value of the capital stock thereof issued to the Borrower upon the incorporation of LMIC, and (iii) any other Person provided that such Person is engaged primarily in one or more of the TLGI Lines of Business; (c) Investments in property or assets to be used in the ordinary course of business of TLGI and the Borrower and the other Subsidiaries conducted as described in Section 7.4 of this Agreement; ----------- (d) Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by TLGI or the Borrower or any other Subsidiary, is accorded one of the two highest commercial paper ratings by Standard & Poor's or Moody's or any other United States nationally recognized credit rating agency of similar standing; (e) Investments in direct obligations of the United States, any agency or instrumentality of the United States, the federal government of Canada or any agency or instrumentality of the federal government of Canada, the payment or guarantee of which constitutes a full faith and credit obligation of the United States or Canada, as the case may be, in either case maturing in three years or less from the date of acquisition thereof; (f) Investments in direct obligations of any Province of Canada or any municipality within a Province of Canada or any State or municipality within the United States maturing in three years or less from the date of acquisition thereof which, in any such case, at the time of acquisition by TLGI or the Borrower or any other Subsidiary, is accorded one of the two highest long-term debt ratings by 68 Standard & Poor's or Moody's or any other United States nationally recognized credit rating agency of similar standing; (g) Investments in certificates of deposit or bankers' acceptances with a maturity of under one year issued by a bank or trust company organized under the laws of the United States or any State thereof, Canada or any Province thereof, Japan or any member of the European Union, having capital, surplus and undivided profits aggregating at least $100,000,000 and having a short-term unsecured debt rating of at least "P-1" by Moody's or "A-1" by Standard & Poor's; (h) Investments in money market and auction rate preferred stock issued by Persons organized under the laws of the United States of America or any State thereof or of Canada or any Province thereof rated "A" or better by Standard & Poor's or "A" or better by Moody's, or an equivalent rating by any other United States nationally recognized credit rating agency of similar standing; (i) Investments in mutual funds investing in assets described in clause (d), (e), (f) or (g) above which in any such case would be ---------- --- --- --- classified as a current asset in accordance with U.S. GAAP and which are managed by a fund manager of recognized United States or Canadian national standing and having share capital of at least $100,000,000 or having at least $250,000,000 under management; (j) Investments of funds received by TLGI or the Borrower or any other Subsidiary in the ordinary course of business, which funds are required to be held in trust for the benefit of others by TLGI, the Borrower or such Subsidiary, as the case may be, and which funds do not constitute assets or liabilities of TLGI or the Borrower or any other Subsidiary; (k) Investments of funds by any Subsidiary which is engaged in the insurance business which are invested and managed by such Subsidiary in the ordinary course of its regulated insurance business and insurance operations; (l) Investments constituting Permitted Acquisitions; (m) Investments in promissory notes issued and options granted by purchasers of cemetery properties sold by the Borrower or any of its Affiliates (but only to the extent permitted by Section 7.13(e)); provided, ---------------- -------- however, that such promissory notes are issued and such options are granted ------- on commercially reasonable terms and the aggregate outstanding principal amount of such promissory notes at any time shall not exceed $100,000,000, and provided, further, that for each such Investment, the related sale and -------- ------- such Investment have not been challenged, or threatened to be challenged, by any Governmental Authority; 69 (n) Investments in SPV's and in Receivables Program Assets in connection with Permitted Receivables Securitizations; and (o) other Investments (in addition to those permitted by clauses (a) ----------- through (n) above) so long as immediately after giving effect to the making --- of any such Investment the aggregate amount of all outstanding Investments made pursuant to this Section 7.16(o) would not exceed 3% of Consolidated --------------- Net Worth; provided, however, that notwithstanding any provision to the contrary herein, - -------- ------- none of TLGI, the Borrower or any Subsidiary of either shall make any Investment in any Person effectively located outside of the United States or Canada if after giving effect to such Investment, the aggregate amount of Investments of TLGI, the Borrower or any Subsidiary of either in any Persons effectively located outside of the United States or Canada would exceed an amount equal to 5% of Consolidated Net Worth. For the purpose of any computation required to be made pursuant to this Agreement, Investments shall be valued at lower of the cost or Fair Value thereof as of the date of computation. 7.17. Negative Pledge. TLGI and the Borrower will not, nor will --------------- either permit any Subsidiary of it (other than an SPV in connection with a Permitted Receivables Securitization) to, enter into any agreement or other arrangement under the terms of which TLGI, the Borrower or any Subsidiary of TLGI or the Borrower (other than any such SPV) would be restricted from (i) performing its respective obligations under the Collateral Trust Agreement or any other Loan Document to which it is a party or (ii) providing a guaranty to the Agent, the Collateral Agent, the Lenders or the L/C Issuer. 7.18. Liens. TLGI and the Borrower will not, nor will either permit ----- any Subsidiary of either to, create, incur or suffer to exist any Lien in, of or on the Property of TLGI, the Borrower or such Subsidiary, as applicable, except: (a) Liens granted to the Agent or the Collateral Agent for the benefit of the Lenders, the L/C Issuer and the other Secured Parties pursuant to the Loan Documents; (b) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (c) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are 70 being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books; (d) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions or other social security or retirement benefits, or similar legislation (except ERISA); (e) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the same or interfere with the use thereof in the business of TLGI, the Borrower or any other Subsidiary; (f) Liens existing as of the close of business on December 31, 1995, and described in Schedule 1 hereto or (ii) created or incurred on or after ---------- January 1, 1996, but only to the extent expressly described on Schedule 1 ---------- hereto; (g) Liens created or incurred after December 31, 1995, given to secure Indebtedness incurred or assumed by TLGI or any Subsidiary of TLGI in connection with the acquisition or construction of property or assets useful and intended to be used in carrying on the business of TLGI or such Subsidiary, including Liens existing on such property or assets at the time of acquisition or construction thereof or at the time of acquisition by TLGI or such Subsidiary of an interest in any business entity then owning such property or assets, whether or not such existing Liens were given to secure the consideration for the property or assets to which they attach, subject to the requirements that (i) the Lien shall attach solely to the fixed assets acquired or purchased by TLGI or such Subsidiary, (ii) the Lien shall have been created or incurred within 180 days after the date of acquisition or completion of construction of such property or assets, and (iii) all such Indebtedness shall have been incurred or assumed within the limitations provided in Section 7.11, and provided that Liens shall be ------------ permitted under this Section 7.18(g) only to the extent that the aggregate --------------- amount of Indebtedness of TLGI and its Subsidiaries outstanding at any time which is secured by Liens described in either Section 7.18(f) or this --------------- Section 7.18(g) shall not exceed 7.5% of Consolidated Net Worth at such --------------- time; (h) Liens on Receivables and Receivables Related Assets arising in connection with any Permitted Receivables Securitization; (i) Liens granted to TLGI, a Regional Partner or a Wholly-Owned Subsidiary of TLGI or a Regional Partner by any Subsidiary (other than the Borrower); 71 (j) Liens on certain intercompany Indebtedness of the Borrower granted under the terms of the MEIP Credit Agreement as in effect on the date of this Agreement; (k) in addition to Liens permitted by the preceding clause (g), ---------- Liens given to secure Indebtedness of TLGI, the Borrower or any Subsidiary of TLGI, provided that the aggregate amount of Indebtedness outstanding at -------- any time which is secured thereby shall not exceed $5,000,000; and (l) any extension, renewal or replacement of any Lien permitted by the preceding clauses (f) and (g) hereof in respect of the same property or ----------- --- assets theretofore subject to such Lien in connection with the extension, renewal or refunding of the Indebtedness secured thereby; provided that (i) -------- such Lien shall attach solely to the same property or assets and (ii) such extension, renewal or refunding of such Indebtedness shall be without increase in the principal remaining unpaid as of the date of such extension, renewal or refunding. 7.19. Minimum Consolidated Net Worth. TLGI will maintain at all times ------------------------------ a Consolidated Net Worth (excluding the cumulative effect of currency translation adjustments) of at least the sum of (a) Consolidated Net Worth (excluding the cumulative effect of currency translation adjustments) as of December 31, 1995, plus (b) the net proceeds to the Borrower from consummation of the Equity Placement and the issuance by TLGI from time to time of preferred stock in exchange for the First Preferred Series C Receipts pursuant to the terms thereof, plus (c) the sum of 50% of Consolidated Net Income for each fiscal quarter ended after January 1, 1996 (but only to the extent that, in the case of any such fiscal quarter, Consolidated Net Income for such fiscal quarter is at least $1.00), plus (d) 66-2/3% of the aggregate amount of the net cash proceeds received by TLGI and the Borrower and the other Subsidiaries from the issuance or sale on and after January 1, 1996 (other than sales or issuances to TLGI or the Borrower or any other Subsidiary and other than pursuant to the Equity Placement or in connection with the issuance by TLGI from time to time of preferred stock in exchange for the First Preferred Series C Receipts pursuant to the terms thereof) of capital stock of TLGI or Indebtedness of TLGI, the Borrower or any other Subsidiary which has been converted into capital stock of TLGI. 72 7.20. Minimum Consolidated Tangible Net Worth. TLGI will maintain at --------------------------------------- all times a Consolidated Tangible Net Worth (excluding the cumulative effect of currency translation adjustments) of at least $150,000,000. 7.21. Maximum Consolidated Indebtedness to Consolidated ------------------------------------------------- Capitalization. TLGI will not permit the ratio of Consolidated Indebtedness to - -------------- Consolidated Capitalization at any time to exceed 0.60 to 1.00. 7.22. Interest Charges Coverage. TLGI will at all times maintain (a) ------------------------- a ratio of EBITDA for the most recently ended period of four consecutive fiscal quarters of TLGI to Consolidated Interest Charges for such period of four consecutive fiscal quarters of not less than 2.750 to 1.00 and (b) a ratio of EBITDA for the most recently ended fiscal quarter to Consolidated Interest Charges for such fiscal quarter of not less than 1.50 to 1.00. 7.23. Maximum Consolidated Indebtedness to Adjusted EBITDA. TLGI will ---------------------------------------------------- not permit the ratio of Consolidated Indebtedness for the most recently ended period of four consecutive fiscal quarters of TLGI to Adjusted EBITDA for such period of four consecutive fiscal quarters (x) to be greater than 5.50 to 1.00 at any time through and including December 31, 1996 or (y) to be greater than 5.00 to 1.00 at any time after December 31, 1996. 7.24. Covenants Not to Compete. TLGI and the Borrower will not, nor ------------------------ will either permit any Subsidiary of either to, create, incur or suffer to exist obligations to make payments in respect of covenants not to compete, determined in the aggregate for TLGI, the Borrower and the Subsidiaries of each, and payable during any one fiscal year, in excess of 5% of the gross revenues of TLGI, the Borrower and all such Subsidiaries for such fiscal year. 7.25. Ownership of the Borrower. TLGI will at all times maintain the ------------------------- Borrower as a Wholly-Owned Subsidiary of TLGI. 7.26. Acquisitions. TLGI and the Borrower will not, nor will either ------------ permit any Subsidiary of either to, make any Acquisition of any Person other than a Permitted Acquisition. 7.27. Pledge of Stock and Grant of Security Interest in Certain --------------------------------------------------------- Assets. TLGI and the Borrower will, and will cause each respective Pledgor - ------ Subsidiary of it to, pledge all outstanding shares of capital stock and other equity interests of any Subsidiary of TLGI or the Borrower (other than any SPV which engages in a Permitted Receivables Securitization) held by it or held by any Subsidiary (other than any SPV which engages in a Permitted Receivables Securitization) of it from time to time (including, in the case of TLGI, the Borrower), and the Borrower shall grant a security interest in all of its financial assets (including, without limitation, accounts receivable and bank accounts), in each case pursuant 73 to the terms of the Collateral Trust Agreement. All such shares of capital stock and other equity interests shall be pledged, and all such security interests shall be granted, solely to secure the Obligations and any other Senior Obligations outstanding from time to time; provided, however, that such pledges -------- ------- of capital stock and other equity interests, and such grants of security interests, shall secure the Senior Obligations (other than the Obligations and the other Senior Obligations identified on Schedule 3 hereto) only to the extent ---------- that the Borrower shall have so elected and given notice thereof to the Collateral Agent and the Agent. Within 60 days of the date of closing for each Major Acquisition of a Person, TLGI and the Borrower shall deliver to the Agent an opinion of counsel addressed to the Agent and the Lender to the effect that all ownership interests in such Person acquired in such Major Acquisition have been duly and validly subjected to the lien granted to the Collateral Agent under the terms of the Collateral Trust Agreement and that all actions to perfect such lien have been duly and validly taken, such opinions to be satisfactory to the Agent in form and substance. 7.28. Subsidiaries. TLGI and the Borrower will not permit any of ------------ their respective Subsidiaries (other than the Borrower in the case of TLGI's Subsidiaries) at any time to (i) issue any preferred stock of any type or nature (provided that such limitation shall not apply to any Subsidiary which has no operations and exists solely as a special purpose finance entity, and provided further that such limitation shall not prohibit the issuance of preferred stock to TLGI or any Wholly-Owned Subsidiary of TLGI), or (ii) except in the case of an SPV which engages in a Permitted Receivables Securitization, agree by contract or otherwise to any restriction on the right and ability of such Subsidiary to declare and pay dividends and make other distributions to its shareholders (other than the restrictions set forth in this Agreement and the other Loan Documents). TLGI and the Borrower will not permit any Indebtedness owed by them to any Subsidiaries to be secured pursuant to the Collateral Trust Agreement unless (a) the Subsidiary to which such Indebtedness is owed is a Finance Subsidiary which is a Wholly-Owned Subsidiary, (b) the security interest securing such Indebtedness is subordinated in accordance with the terms and conditions of the Collateral Trust Agreement, (c) all shares of capital stock or other equity interests of such Subsidiary are pledged under the terms of the Collateral Trust Agreement, (d) such Subsidiary has no obligations other than Indebtedness owed to TLGI or the Borrower or an Affiliate of TLGI, and other than obligations to purchase accounts receivable or other financial assets of an Affiliate of TLGI, (e) such Subsidiary has no material assets other than Indebtedness owed to it by TLGI or the Borrower or an Affiliate of TLGI, and other than the accounts receivable and other financial assets described in the foregoing clause (d), and (f) such Subsidiary has no activities or operations ---------- other than the issuance of its capital stock or other equity interests and the purchase and administration of the accounts receivable and other financial assets described in the foregoing clause (d), and other than the holding by it ---------- of Indebtedness, accounts receivable and other financial assets described in the foregoing clause (e). ---------- 74 7.29. Subsidiaries' Stock. TLGI and the Borrower will cause: ------------------- (a) each Canadian Subsidiary incorporated under the laws of British Columbia, the shares of which are Pledged Shares under the Collateral Trust Agreement, to ensure that its constating documents do not contain any restrictions on a transfer of such Pledged Shares pursuant to the due exercise of the Trustee's powers under the Collateral Trust Agreement; (b) the board of directors of each Canadian Subsidiary incorporated under the laws of Nova Scotia or Prince Edward Island, the shares of which are Pledged Shares under the Collateral Trust Agreement, to pass a resolution consenting to a transfer of such Pledged Shares pursuant to the due exercise of the Trustee's powers under the Collateral Trust Agreement; and (c) the directors and shareholders of each Canadian Subsidiary incorporated under the federal laws of Canada, or the laws of Quebec, Ontario, Manitoba, Saskatchewan or Alberta, the share of which are Pledged Shares under the Collateral Trust Agreement, to execute and deliver an unanimous shareholders agreement to the Trustee providing for the consent of the shareholders to a transfer of such Pledged Shares pursuant to the due exercise of the Trustee's powers under the Collateral Trust Agreement. Except as set out in clauses (d) and (e), TLGI and the Borrower will, and will cause each U.S. Subsidiary, the shares of which are Pledged Shares under the Collateral Trust Agreement, to take any and all actions necessary to ensure that there are no restrictions on a transfer of such Pledged Shares pursuant to the due exercise of the Trustee's powers under the Collateral Trust Agreement, except with respect to any and all restrictions under Applicable Law. The foregoing sentence does not apply to: (d) the interests of TLGI, the Borrower or any Pledgor Subsidiary in any limited partnership or limited liability company where the restriction is required to preserve the tax status of the entity; and (e) the shares listed in Schedule 6 hereto. ---------- The actions described in this Section 7.29 must be completed with respect ------------ to any Subsidiary no later than 90 days after any of such Subsidiary's shares become Pledged Shares under the Collateral Trust Agreement. The terms "Pledged Shares", "Trustee" and "Applicable Law", as used in this Section 7.29, have the meanings specified in the Collateral Trust Agreement. - ------------ 75 ARTICLE VIII DEFAULTS 8. Defaults. The occurrence of any one or more of the following -------- events shall constitute a Default: 8.1. Any representation or warranty made or deemed made by or on behalf of TLGI, the Borrower or any Pledgor Subsidiary to the Lenders or the Agent under or in connection with this Agreement, any Revolving Loan, any Swing Line Loan, any Letter of Credit, any Guaranty, the Collateral Trust Agreement, any other Loan Document or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made or deemed made. 8.2. Nonpayment of principal of any Revolving Loan or Swing Line Loan when due, or nonpayment of interest upon any Revolving Loan or Swing Line Loan or of any commitment fee or other obligations (including, without limitation, Reimbursement Obligations) under any of the Loan Documents within three Business Days after the same becomes due. 8.3. The breach by TLGI, the Borrower or any Subsidiary of either of any of the terms or provisions of Section 7.2, Section 7.3(a), Sections 7.10 ----------- -------------- ------------- through 7.14, or Sections 7.16 through 7.28; provided, however, any failure to ---- ------------- ---- -------- ------- provide notice of any Unmatured Default pursuant to Section 7.3(a) shall not -------------- give rise to a Default under this Section 8.3 if such Unmatured Default may be ----------- cured pursuant to the terms of this Agreement and is in fact cured prior to maturing into a Default. 8.4. The breach by TLGI, the Borrower or any Subsidiary of either (other than a breach which constitutes a Default under Section 8.1, 8.2 or 8.3) ----------- --- --- of any of the terms or provisions of this Agreement or any other Loan Document which is not remedied within the earlier to occur of (x) 30 days after written notice from the Agent or any Lender or (y) 30 days after any Executive Officer first has knowledge thereof. 8.5. Failure of TLGI, the Borrower or any Subsidiaries of either to pay any Indebtedness equal to or exceeding $5,000,000 in the aggregate for TLGI, the Borrower and such Subsidiaries when due; or the default by TLGI, the Borrower or any Subsidiaries of either in the performance of any term, provision or condition contained in any agreement under which any Indebtedness equal to or exceeding $5,000,000 in the aggregate for TLGI, the Borrower and such Subsidiaries was created or is governed, or any other event shall occur or condition exist the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any Indebtedness of TLGI, the Borrower or any Subsidiaries of either equal to or exceeding $5,000,000 in the aggregate for all such Persons shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated 76 maturity thereof; or TLGI, the Borrower or any Subsidiary of either shall not pay, or shall admit in writing its inability to pay, its debts generally as they become due. 8.6. TLGI, the Borrower or any Subsidiary of either shall (a) have an order for relief entered with respect to it under the United States bankruptcy laws as now or hereafter in effect or cause or allow any similar event to occur under any bankruptcy or similar law or laws for the relief of debtors as now or hereafter in effect in any other jurisdiction, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to or acquiesce in the appointment of a receiver, custodian, trustee, examiner, liquidator, monitor or similar official for it or any of its Property, (d) institute any proceeding seeking an order for relief under the United States bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or any of its Property or its debts under any law relating to bankruptcy, insolvency or reorganization or compromise of debt or relief of debtors as now or hereafter in effect in any jurisdiction including, without limitation, any application under The Bankruptcy and Insolvency Act (Canada) or The Companies' Creditors Arrangement Act (Canada), the filing of a proposal or notice under The Bankruptcy and Insolvency Act (Canada) or any organization, arrangement or compromise of debt under the laws of its jurisdiction of incorporation or fail to promptly file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 8.6, or (f) fail to contest in good faith any ----------- appointment or proceeding described in Section 8.7. ------------ 8.7. Without the application, approval or consent of TLGI, the Borrower or any Subsidiary of either, a receiver, custodian, trustee, examiner, liquidator or similar official shall be appointed (either privately or by a court) for TLGI, the Borrower or any Subsidiary or any of its Property, or a proceeding described in Section 8.6(d) shall be instituted against TLGI, the -------------- Borrower or any Subsidiary and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 8.8. Any court, government or Governmental Authority shall condemn, seize or otherwise appropriate, or take custody or control of (each a "Condemnation"), all or any portion of the Property of TLGI, the Borrower or any - ------------- of the Subsidiaries of either which, when taken together with all other Property of TLGI, the Borrower and such Subsidiaries so condemned, seized, appropriated or taken custody or control of, during the twelve-month period ending with the month in which any such Condemnation occurs, constitutes a Substantial Portion. 8.9. TLGI, the Borrower or any Subsidiary of either shall fail within 30 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $5,000,000, unless such judgment or order has been stayed on appeal or otherwise 77 is being appropriately contested in good faith and against which appropriate reserves have been established in accordance with GAAP (provided that, in any event, execution of such judgment or order has been effectively stayed and no execution thereof has commenced and is continuing). 8.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $5,000,000 or any Reportable Event, the occurrence of which may reasonably be expected to give rise to a Material Adverse Effect, shall occur in connection with any Plan, or a contribution failure sufficient to give rise to a lien under section 302(f) of ERISA shall occur with respect to any Single Employer Plan. 8.11. TLGI or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by TLGI or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $5,000,000 or requires payments exceeding $1,000,000 per annum. 8.12. TLGI or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of TLGI and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $1,000,000. 8.13. TLGI, the Borrower or any Subsidiary of either shall be the subject of any proceeding or investigation pertaining to the release by TLGI, the Borrower or any such Subsidiary or any other Person of any toxic or hazardous waste or substance into the environment, or any violation of any environmental, health or safety law or regulation of any Governmental Authority, which, in either case, could reasonably be expected to have a Material Adverse Effect. 8.14. Any Change of Control shall occur. 8.15. Any Guaranty shall fail to remain in full force or effect, or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to perform its obligations under or otherwise comply with any of the terms or provisions of any Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under any Guaranty to which it is a party, or shall give notice to such effect. 78 8.16. The Collateral Trust Agreement shall fail to remain in full force or effect, or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Collateral Trust Agreement, or any pledgor thereunder shall fail to perform its obligations under or otherwise comply with any of the terms or provisions of the Collateral Trust Agreement, or any pledgor thereunder shall deny that it has any further liability under the Collateral Trust Agreement, or shall give notice to such effect, or any portion of the shares of stock pledged, or security interests granted, pursuant to the Collateral Trust Agreement shall cease to be validly perfected in favor of the Collateral Agent for the benefit of the Secured Parties, or (except as otherwise provided in the Collateral Trust Agreement and except to the extent such pledged shares represent Minority Interests) such pledged shares shall fail to represent 100% of the outstanding shares of stock of the Subsidiaries whose shares of stock are subject to the Collateral Trust Agreement. 8.17. A Material Judgment Event shall have occurred and 90 days shall have passed without one or more of the judgments, awards or other orders giving rise to such Material Judgment Event having been vacated such that on such 90th day the aggregate amount of all judgments, awards and orders entered against any of TLGI, the Borrower or any of their respective Subsidiaries which shall have been outstanding for at least 90 days without having been finally satisfied in full or vacated shall be in excess of $100,000,000. ARTICLE IX ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 9.1. Acceleration. If any Default described in Section 8.6 or 8.7 ------------ ----------- --- occurs with respect to TLGI or the Borrower (but not with respect to any other Subsidiary), the obligations of the Lenders to make Revolving Loans or purchase participations in Swing Line Loans and Letters of Credit hereunder and the obligation of the Swing Line Lender to make Swing Line Loans and the obligation of the L/C Issuer to issue Letters of Credit hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent, the L/C Issuer, the Swing Line Lender or any Lender. If any other Default occurs, the Required Lenders may (a) terminate or suspend the obligations of the Lenders to make Revolving Loans and purchase participations in Swing Line Loans and Letters of Credit hereunder, whereupon the obligation of the Swing Line Lender to make Swing Line Loans and the obligation of the L/C Issuer to issue Letters of Credit hereunder shall also terminate or be suspended, or (b) declare the Obligations to be due and payable, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which TLGI and the Borrower hereby expressly waive, or (c) take the action described in both the preceding clause (a) and the preceding clause (b). ---------- ---------- If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Revolving Loans hereunder as a result 79 of any Default (other than any Default as described in Section 8.6 or 8.7 with ----------- --- respect to TLGI, the Borrower or any other Subsidiary) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to TLGI and the Borrower, rescind and annul such acceleration and/or termination. 9.2. Amendments. Subject to the provisions of this Article IX, the ---------- ---------- Required Lenders (or the Agent with the consent in writing of the Required Lenders), TLGI and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders, TLGI or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental -------- ------- agreement shall, without the consent of each Lender affected thereby: (a) extend the Commitment of any Lender, extend the maturity of any Revolving Loan, extend the final maturity beyond the Facility Termination Date of any Swing Line Loan or Reimbursement Obligation, extend the expiry date of any Letter of Credit beyond the date which is five Business Days immediately preceding the Facility Termination Date, or forgive all or any portion of the principal amount of any Revolving Loan, Swing Line Loan or Reimbursement Obligation or any interest or fees, or reduce the rate or extend the time of payment of interest or fees on any Revolving Loan, Swing Line Loan, Reimbursement Obligation, Commitment or Letter of Credit; (b) reduce the percentage specified in the definition of Required Lenders; (c) reduce the amount or extend the payment date for the mandatory payments required under Section 2.2, 2.19 or 2.20, reduce the amount of or ----------- ---- ---- extend the reduction date for any mandatory reduction of the Aggregate Commitment required by Section 2.10(b), or increase the amount of the --------------- Commitment of any Lender hereunder, or permit TLGI or the Borrower to assign its rights under this Agreement; (d) amend this Section 9.2 or Section 13.1(a); ----------- --------------- (e) release any Guarantor other than as contemplated in Section ------- 10.15 or as set forth in the Collateral Trust Agreement; or ----- (f) prior to the appointment of Enforcement Representatives under (and as defined in) the Collateral Trust Agreement, release any collateral pledged pursuant to the Collateral Trust Agreement other than in connection with an Approved Sale. 80 Following the appointment of any Enforcement Representatives under (and as defined in) the Collateral Trust Agreement, the Lenders and the Agent agree that any instructions or directions to be given by the Lenders to the Enforcement Representatives appointed by the Lender shall be valid if given by action of the Required Lenders and any action to be taken by them with respect to enforcement or other remedies shall be taken solely in accordance with the terms of the Collateral Trust Agreement. The Lenders and the Agent agree (unless otherwise approved by all of the Lenders) that any vote to be taken by the Lenders under the terms of the Collateral Trust Agreement (whether involving the release of collateral pledged thereunder, enforcement actions, amendments, waivers or otherwise) shall be taken solely by the Agent casting votes on behalf of each Lender, such votes to be cast identically by the Agent on behalf of each Lender and to be based upon the actions (if any) of the Lenders taken pursuant to, and in accordance with, the terms of this Agreement. No amendment of any provision of this Agreement relating in any way to the Agent shall be effective without the written consent of the Agent. No amendment of any provision of this Agreement relating in any way to the L/C Issuer or any or all of the Letters of Credit shall be effective without the written consent of the L/C Issuer and the Agent. No amendment of any provision of this Agreement relating in any way to the Swing Line Lender, the Swing Line Commitment or any or all of the Swing Line Loans shall be effective without the written consent of the Swing Line Lender and the Agent. No amendment of any provision of this Agreement relating in any way to the Documentation Agent shall be effective without the written consent of the Documentation Agent. The Agent may waive payment of the fee required under Section 13.3.2 without obtaining the consent of any other party to this - -------------- Agreement. 9.3. Preservation of Rights. No delay or omission of the Lenders or ---------------------- any of them or the Agent, the Documentation Agent, the L/C Issuer or the Collateral Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Revolving Loan or a Swing Line Loan or the issuance of a Letter of Credit notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Revolving Loan or Swing Line Loan or Letter of Credit shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by (or with the consent of) the Lenders required pursuant to Section 9.2, ----------- and then only to the extent specifically set forth in such writing. All remedies contained in the Loan Documents or afforded by law shall be cumulative and all shall be available to the Agent, the Lenders, the L/C Issuer and the Collateral Agent (and to the extent expressly set forth, the Documentation Agent) until the Obligations have been paid in full. 81 ARTICLE X GENERAL PROVISIONS 10.1. Survival of Representations. All representations and --------------------------- warranties of TLGI and the Borrower contained in this Agreement shall survive the occurrence of the effectiveness of this Agreement and the making of the Revolving Loans and the Swing Line Loans and the issuance of the Letters of Credit herein contemplated. 10.2. Governmental Regulation. Anything contained in this Agreement ----------------------- to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower and the L/C Issuer shall not be obligated to issue any Letter of Credit in violation of any limitation or prohibition provided by any applicable statute or regulation. 10.3. Stamp Duties. The Borrower shall pay and forthwith on demand ------------ indemnify each of the Agent, each Lender and the L/C Issuer against any liability it incurs in respect of any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of any Loan Document. 10.4. Headings. Section headings in the Loan Documents are for -------- convenience of reference only and shall not govern the interpretation of any of the provisions of the Loan Documents. 10.5. Entire Agreement; Independence of Covenants. The Loan ------------------------------------------- Documents (together with the fee letter agreement described herein) embody the entire agreement and understanding among TLGI, the Borrower, the Agent, the Lenders, the L/C Issuer and the Collateral Agent and supersede all prior agreements and understandings among TLGI, the Borrower, the Agent, the Lenders, the L/C Issuer and the Collateral Agent relating to the subject matter thereof. Except as otherwise expressly provided herein, no provision of this Agreement shall be construed as waiving, negating or otherwise qualifying any restriction, limitation or other condition imposed by any other provision of this Agreement. 10.6. Several Obligations; Benefits of this Agreement. The ----------------------------------------------- respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 10.7. Expenses; Indemnification. The Borrower shall reimburse the ------------------------- Agent and the Documentation Agent for any costs, internal charges and out-of- pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent) paid or incurred by the Agent or the Documentation Agent in connection with the preparation, 82 negotiation, execution, delivery, review, amendment, modification and administration of the Loan Documents. Such costs, charges and out-of-pocket expenses shall include, without limitation, those arising in connection with the litigation audit conducted by the Agent and its counsel, and all such costs, charges and out-of-pocket expenses shall be payable regardless of whether the transactions contemplated by this Agreement and the other Loan Documents shall ever be consummated. TLGI and the Borrower also agree to reimburse the Agent, the L/C Issuer and the Lenders for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, the L/C Issuer and the Lenders, which attorneys may be employees of the Lenders) paid or incurred by the Agent, the L/C Issuer or any Lender in connection with the collection and enforcement of the Loan Documents. TLGI and the Borrower further agree to indemnify the Agent, the Documentation Agent, the L/C Issuer and each Lender, and its directors, officers and employees, against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Documentation Agent, the L/C Issuer or any Lender is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Revolving Loan, Swing Line Loan or Letter of Credit hereunder. Without limiting the generality of the foregoing, in the event that any of the Agent, the Documentation Agent, the L/C Issuer or any Lender (each an "Indemnified Party") becomes involved in any capacity in any action, ----------------- proceeding or investigation brought by or against any Person, including stockholders of TLGI, in connection with or as a result of either the arrangements evidenced by this Agreement and the other Loan Documents or any matter referred to herein or therein, TLGI and the Borrower, jointly and severally, periodically will reimburse such Indemnified Party for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. TLGI and the Borrower, jointly and severally, also will indemnify and hold such Indemnified Party harmless against any and all losses, claims, damages or liabilities to any such Person in connection with or as a result of either the arrangements evidenced by this Agreement and the other Loan Documents or any matter referred to herein or therein, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of such Indemnified Party in performing the services that are the subject hereof. If for any reason the foregoing indemnification is unavailable to an Indemnified Party or insufficient to hold it harmless, then TLGI and the Borrower, jointly and severally, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of TLGI, the Borrower and their stockholders on the one hand and such Indemnified Party on the other hand in the matters contemplated herein as well as the relative fault of TLGI, the Borrower and such Indemnified Party with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of TLGI and the Borrower hereunder shall be in addition to any liability which TLGI and the Borrower may otherwise have, shall extend upon the same terms and conditions to any Affiliate of any Indemnified Party and the partners, directors, 83 agents, employees and controlling Persons (if any), as the case may be, of such Indemnified Party and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of TLGI, the Borrower, the Indemnified Parties, any such Affiliate and any such Person. TLGI and the Borrower also agree that neither any Indemnified Party nor any of such Affiliates, partners, directors, agents, employees or controlling Persons shall have any liability to TLGI, the Borrower, any Person asserting claims on behalf of or in right of TLGI or the Borrower or any other Person in connection with or as a result of either the arrangements evidenced by this Agreement and the other Loan Documents or any matter referred to herein or therein except to the extent that any losses, claims, damages, liabilities or expenses incurred by TLGI or the Borrower result from the gross negligence or bad faith of such Indemnified Party in performing the services that are the subject hereof. The obligations of TLGI and the Borrower under this Section ------- 10.7 shall survive the termination of this Agreement. - ---- 10.8. Numbers of Documents. All statements, notices, closing -------------------- documents and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may retain one and furnish one to each of the Lenders. 10.9. Accounting; Currency Conversions. Except as provided to the -------------------------------- contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles; provided, however, that (a) to the extent that any change -------- ------- in GAAP shall alter the result of any financial covenant or test or any other accounting determination to be computed or made hereunder, TLGI and the Borrower agree that such covenant, test or other determination shall continue to be computed or made on the basis of Agreement Accounting Principles as in effect prior to such change in GAAP, unless the Required Lenders shall otherwise consent and (b) the MIPS shall be deemed to constitute capital stock of TLGI for purposes of this Agreement. To the extent that for purposes of computing any financial covenant or test or making any other accounting determination hereunder, any amount denominated in one currency must be converted into another currency, such conversion shall be made in a manner that accords with the currency conversion policies and procedures used in preparing the financial statements of TLGI, the Borrower and the other Subsidiaries on the basis of which the relevant computations or determinations are or will be made, unless the Required Lenders shall have specified an alternative basis for making such conversions. 10.10. Severability of Provisions. Any provision in any Loan Document -------------------------- that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 84 10.11. Nonliability of Lenders. The relationship between the ----------------------- Borrower, on the one hand, and the Lenders, the L/C Issuer and the Agent, on the other hand, shall be solely that of borrower and lender and the relationship between TLGI and the Subsidiaries (other than the Borrower), on the one hand, and the Lenders, the L/C Issuer and the Agent, on the other hand, shall be construed accordingly. None of the Agent, the L/C Issuer or any Lender shall have any fiduciary responsibilities to TLGI, the Borrower or any other Subsidiary. None of the Agent, the L/C Issuer or any Lender undertakes any responsibility to TLGI, the Borrower or any other Subsidiary to review or inform TLGI, the Borrower or any other Subsidiary of any matter in connection with any phase of the business or operations of TLGI, the Borrower or any other Subsidiary. 10.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING ------------- A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 10.13. CONSENT TO JURISDICTION. EACH OF TLGI AND THE BORROWER HEREBY ----------------------- IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH OF TLGI AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE L/C ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST TLGI OR THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY TLGI OR THE BORROWER AGAINST THE AGENT, THE L/C ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE AGENT, THE L/C ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A FEDERAL OR STATE COURT SITTING IN NEW YORK CITY. EACH OF THE BORROWER AND TLGI HEREBY IRREVOCABLY APPOINTS THELEN, MARRIN, JOHNSON & BRIDGES (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE ------------- HEREOF AT 330 MADISON AVENUE, 11TH FLOOR, NEW YORK, NEW YORK 10017, ATTENTION: DAVID P. GRAYBEAL, ESQ., AS ITS AGENT TO RECEIVE ON BEHALF OF THE BORROWER OR TLGI, AS APPLICABLE, AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND 85 COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER OR TLGI, AS APPLICABLE, IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS WITH A COPY TO THE BORROWER OR TLGI, AS APPLICABLE, AT ITS ADDRESS FOR NOTICES HEREUNDER, AND THE BORROWER OR TLGI, AS APPLICABLE, HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF TLGI AND THE BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO ITS ADDRESS FOR NOTICES HEREUNDER. EACH OF TLGI AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 10.14. WAIVER OF JURY TRIAL. TLGI, THE BORROWER, THE AGENT, THE L/C -------------------- ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 10.15. Confidentiality. Each of the Agent, each Lender and the L/C --------------- Issuer agrees to hold any confidential information identified in writing as such which it may receive from TLGI, the Borrower or any other Subsidiary pursuant to this Agreement in confidence, except for disclosure (a) to other Lenders, the L/C Issuer and the Agent and their respective Affiliates, (b) to legal counsel, accountants and other professional advisors to the Agent, the L/C Issuer or that Lender or to a Transferee, (c) to regulatory officials and examiners, (d) to any Person as requested pursuant to or as required by law, regulation or legal process, (e) to any Person in connection with any legal proceeding to which the Agent, the L/C Issuer or that Lender is a party and (f) permitted by Section ------- 13.4. - ---- 10.16. Judgment Currency. If the Agent, the L/C Issuer or any Lender ----------------- receives an amount in respect of the Borrower's or TLGI's liability under the Loan Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the "contractual currency") in which the amount is expressed to be payable under the relevant Loan Document, (a) TLGI and the Borrower, as applicable, shall indemnify the Agent, the L/C Issuer or such Lender, as applicable, as an independent obligation against any loss, cost, expense or liability arising out of or as a result of the conversion; (b) if the amount received by the Agent, the L/C Issuer or such Lender, as applicable, when converted into the contractual currency at a market rate on the date of 86 receipt by the Agent, the L/C Issuer or such Lender in the usual course of its business, is less than the amount owed in the contractual currency, the Borrower or TLGI, as applicable, shall forthwith on demand pay to the Agent, the L/C Issuer or such Lender, as applicable, an amount in the contractual currency equal to the deficit; and (c) TLGI or the Borrower, as applicable, shall pay to the Agent, the L/C Issuer or such Lender, as applicable, on demand any exchange costs and taxes payable in connection with any such conversion. Each of the Borrower and TLGI waives any right it may have in any jurisdiction to the extent permitted by law to pay any amount under the Loan Documents in a currency other than that in which it is expressed to be payable. 10.17. Canadian Interest Antidotes. (a) Notwithstanding any other --------------------------- provision of this Agreement, if and to the extent that the laws of Canada are applicable to interest payable under this Agreement, no interest on the credit advanced will be payable in excess of that permitted by the laws of Canada. If the effective annual rate of interest, calculated in accordance with generally accepted actuarial practices and principles, would exceed 60% (or such other rate as the Parliament of Canada may determine from time to time as the criminal rate) on the credit advanced, then: (i) the amount of any charges for the use of money, expenses, fees, bonuses, commissions or other charges payable in connection therewith will be reduced to the extent necessary to eliminate such excess; (ii) any remaining excess that has been paid will be credited towards repayment of the principal amount; and (iii) any overpayment that may remain after such crediting will be returned forthwith on demand. In this paragraph the terms "interest," "criminal rate" and "credit advanced" have the meaning ascribed to them in Section 347 of the Criminal Code (Canada). (b) If and to the extent that the laws of Canada are applicable to interest payable under this Agreement, for the purpose of the Interest Act (Canada) the yearly rate of interest to which interest calculated on the basis of a 360- or 365-day year is equivalent is the rate of interest determined as herein provided multiplied by the number of days in such year and divided by 360 or 365, as the case may be. 10.18. Counterparts; Effectiveness. This Agreement may be executed in --------------------------- any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall become effective on the Effective Date. 87 ARTICLE XI THE AGENT AND THE DOCUMENTATION AGENT 11.1. Appointment. Bank of Montreal is hereby appointed Agent ----------- hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the agent of such Lender. The Agent agrees to act as such upon the express conditions contained in this Article XI. ---------- The Agent shall not have a fiduciary relationship in respect of TLGI, the Borrower, any other Subsidiary or any Lender by reason of this Agreement. 11.2. Powers. The Agent shall have and may exercise such powers ------ under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 11.3. General Immunity. Neither the Agent nor any of its directors, ---------------- officers, agents or employees shall be liable to any or all of TLGI, the Borrower, any other Subsidiary, the Lenders or the L/C Issuer for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. 11.4. No Responsibility for Revolving Loans, Swing Line Loans, ------------------------------------------------------- Recitals, Etc. Neither the Agent nor any of its directors, officers, agents or - --------------- employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any extension of credit hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the ---------- Agent; or (d) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. The Agent shall have no duty to disclose to the Lenders or the L/C Issuer information that is not required to be furnished by TLGI or the Borrower to the Agent at such time, but is voluntarily furnished by TLGI or the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 11.5. Action on Instructions of Lenders. The Agent shall in all --------------------------------- cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders or, in the case of any act or failure to act calculated to give rise to any of the events or circumstances described in clauses (a) through ----------- (f) of Section 9.2, each affected Lender, and such instructions and any action - --- ----------- taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Revolving Loans and participations in Swing Line Loans, 88 Reimbursement Obligations and Letters of Credit. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may --- ---- incur by reason of taking or continuing to take any such action. 11.6. Employment of Agents and Counsel. The Agent may execute any of -------------------------------- its duties as Agent hereunder and under any other Loan Document by or through employees, agents and attorneys-in-fact and shall not be answerable to the Lenders or the L/C Issuer, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. 11.7. Reliance on Documents; Counsel. The Agent shall be entitled to ------------------------------ rely upon any record, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons and, with respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 11.8. Agent's Reimbursement and Indemnification. The Lenders agree ----------------------------------------- to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (a) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (b) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents to the extent not otherwise reimbursed by the Borrower and (c) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to -------- the extent they arise from the gross negligence or willful misconduct of the Agent. The obligations of the Lenders under this Section 11.8 shall survive ------------ payment of the Obligations and termination of this Agreement. 11.9. Rights as a Lender. In the event the Agent is a Lender, the ------------------ Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with 89 TLGI, the Borrower or any other Subsidiary in which TLGI, the Borrower or any such other Subsidiary is not restricted hereby from engaging with any other Person. 11.10. Lenders' Credit Decisions. Each Lender acknowledges that it ------------------------- has, independently and without reliance upon the Agent or any other Lender and based on the financial statements prepared by TLGI and the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents 11.11. Successor Agent. The Agent may resign at any time by giving --------------- written notice thereof to the Lenders, the L/C Issuer and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, 45 days after the resigning Agent gives notice of its intention to resign. The Agent shall so resign if at any time it ceases to be a Lender. Upon any such resignation the Required Lenders shall have the right to appoint, on behalf of the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within 30 days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Lenders, a successor Agent. If the Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender (except for payments required to be made directly to the L/C Issuer) and for all other purposes shall deal directly with the Lenders and the L/C Issuer. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the effectiveness of the resignation of the Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Agent, the provisions of this Article XI shall continue in effect for the benefit of such ---------- Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. 11.12. Agent's Fee. The Borrower agrees to pay to the Agent, for its ----------- own account, the fees agreed to by the Borrower and the Agent pursuant to that certain letter agreement dated as of May 15, 1996, or as otherwise agreed from time to time. 90 11.13. Documentation Agent. The Documentation Agent shall have no ------------------- rights, duties, liabilities or obligations under or in connection with this Agreement except for such rights as are expressly granted to it in this Agreement, including in Section 10.7, and the Documentation Agent shall not have ------------ any fiduciary relationship in respect of TLGI, the Borrower, any other Subsidiary or any Lender by reason of this Agreement. ARTICLE XII SETOFF; RATABLE PAYMENTS 12.1. Setoff. In addition to, and without limitation of, any rights ------ of the Lenders and the L/C Issuer under applicable law, if TLGI or the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or the L/C Issuer to or for the credit or account of TLGI or the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender or the L/C Issuer, whether or not the Obligations, or any part hereof, shall then be due. 12.2. Ratable Payments. If any Lender, whether by setoff or ---------------- otherwise, has payment made to it upon its Revolving Loans or its participation in Swing Line Loans, Reimbursement Obligations or Letters of Credit (other than payments received pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion ----------- --- --- than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Revolving Loans and the participations in Swing Line Loans, Reimbursement Obligations and Letters of Credit held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Revolving Loans and its ratable participation in Swing Line Loans, Reimbursement Obligations and Letters of Credit. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Revolving Loans, L/C Interest and Swing Line Interest. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 13.1. Successors and Assigns. The terms and provisions of the Loan ---------------------- Documents shall be binding upon and inure to the benefit of TLGI, the Borrower, the Agent, the Documentation Agent, the Collateral Agent, the L/C Issuer and the Lenders and their respective successors and assigns, except that (a) neither TLGI nor the Borrower shall have 91 the right to assign its rights or obligations under the Loan Documents and (b) any assignment by any Lender (including the Swing Line Lender) must be made in compliance with Section 13.3. Notwithstanding clause (b) of the preceding ------------ ---------- sentence, any Lender may at any time, without the consent of TLGI, the Borrower, the Agent, the Collateral Agent or the L/C Issuer, assign all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided, however, -------- ------- that no such assignment to a Federal Reserve Bank shall release the transferor Lender from its obligations hereunder. In order to facilitate such assignment, the Borrower hereby agrees that, upon request of any Lender at any time and from time to time after the Borrower has made its initial borrowing hereunder, the Borrower shall provide to such Lender, at the Borrower's own expense, a promissory note, substantially in the form of Exhibit A hereto, evidencing the --------- Revolving Loans owing to such Lender. The Agent may treat the payee of any Revolving Loan as the owner thereof for all purposes hereof unless and until such payee complies with Section 13.3 in the case of an assignment thereof or, ------------ in the case of any other transfer, a written notice of the transfer is filed with the Agent. Any assignee or transferee of a Revolving Loan, a Swing Line Loan, a participation in a Swing Line Loan, a participation in a Letter of Credit or a participation in a Reimbursement Obligation agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents, and any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Revolving Loan, Swing Line Loan, participation in a Swing Line Loan, participation in a Letter of Credit or participation in a Reimbursement Obligation, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Revolving Loan, Swing Line Loan, participation in a Swing Line Loan, participation in a Letter of Credit or participation in a Reimbursement Obligation. 13.2. Participations. -------------- 13.2.1 Permitted Participations; Effect. Any Lender may, in -------------------------------- the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities (each such bank or other entity being referred to herein as a "Participant") participating interests in any Revolving Loan owing to such Lender, any Swing Line Interest or L/C Interest held by such Lender, the Commitment of such Lender or any other interest of such Lender under the Loan Documents; provided, however, that no Lender shall grant a -------- ------- participating interest to any entity which is engaged in any business which is competitive in any material respect with the business of TLGI, the Borrower or any of the Subsidiaries of TLGI. In the event of any such sale by a Lender of participating interests to a Participant, ----------- such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Revolving Loan, Swing Line Interest or L/C Interest for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement 92 shall be determined as if such Lender had not sold such participating interests and TLGI, the Borrower, the L/C Issuer and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. The participation agreement effecting the sale of any participating interest shall contain a representation by the Participant to the effect that none of the consideration used to make the purchase of the participating interest in the Commitment, Revolving Loans, the Swing Line Loans, the Swing Line Interests and the L/C Interests under such participation agreement are "plan assets" as defined under ERISA and that the rights and interests of the Participant in and under the Loan Documents will not be "plan assets" under ERISA. 13.2.2 Voting Rights. Each Lender shall retain the sole right ------------- to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Revolving Loan, Swing Line Loan, Swing Line Interest, L/C Interest or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Revolving Loan, Swing Line Loan, Swing Line Interest, L/C Interest or Commitment, or postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees on, any such Revolving Loan, Swing Line Loan, Swing Line Interest, L/C Interest or Commitment. 13.2.3 Setoff. Each Lender's right to exercise its right of ------ setoff provided in Section 12.1 shall not be reduced or impaired by ------------ any grant by such Lender of a participating interest to a Participant. 13.3. Assignments. ----------- 13.3.1 Permitted Assignments. (a) Any Lender may, in the --------------------- ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its Commitment and outstanding ---------- Revolving Loans, Swing Line Interests and L/C Interests, together with its rights and obligations under the Loan Documents with respect thereto; provided, however, that (i) each such assignment shall be of -------- ------- a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations so assigned; (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of such assignment) may be in the amount of such Lender's entire Commitment but otherwise shall not be less than $5,000,000 or an integral multiple of $1,000,000 in excess of that amount; and (iii) notwithstanding the foregoing clause ------ (ii), (x) if the ---- 93 assignment is made to a Lender or an Affiliate of the assigning Lender, the amount of the Commitment assigned shall not be less than $1,000,000 and (y) if the assignment is made pursuant to Section ------- 2.18(a)(ii), the Commitment assigned may be in the amount of the ----------- relevant Non-Consenting Lender's entire remaining Commitment after giving effect to all assignments pursuant to Section 2.18(a)(i). Such ------------------ assignment shall be substantially in the form of Exhibit D hereto or --------- in such other form as may be agreed to by the parties thereto. The consent of TLGI, the Borrower, the L/C Issuer and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender; provided, however, that if a Default -------- ------- has occurred and is continuing, the consent of neither TLGI nor the Borrower shall be required. Such consents shall not be unreasonably withheld. (b) The Swing Line Lender may, in accordance with applicable law, at any time assign to a single Purchaser all (but not less than all) of the Swing Line Commitment and the outstanding Swing Line Loans, together with the rights and obligations of the Swing Line Lender under the Loan Documents with respect thereto; provided, -------- however, that the consent of the Agent, the Required Lenders and the ------- Borrower shall be required prior to such assignment becoming effective. Such assignment shall be in such form as the Agent, the Borrower and the Swing Line Lender shall agree. Such assignment shall become effective on the date agreed to by the Agent and the Swing Line Lender. Any such assignment pursuant to this Section 13.3.1(b) shall ----------------- be a "Swing Line Assignment". All provisions of Section 13.3.2 shall --------------------- -------------- be applicable to any Swing Line Assignment, except for the first two sentences thereof, and except that each reference therein to "assignment", "Lender", "Commitment" and "Revolving Loans" shall be deemed to be references to the Swing Line Assignment, Swing Line Lender, Swing Line Commitment and Swing Line Loans, respectively. 13.3.2 Effect; Effective Date of Assignments. Solely with ------------------------------------- respect to assignments under Section 13.3.1(a), upon (a) delivery to ----------------- the Agent of a notice of assignment, substantially in the form attached to Exhibit D hereto (a "Notice of Assignment"), together with --------- -------------------- any consents required by Section 13.1, and (b) payment of a $2,500 fee ------------ to the Agent for processing such assignment, such assignment shall become effective on the date for effectiveness specified in such Notice of Assignment. If any such assignment is made as contemplated by the terms of Section 2.18 or Section 3.5 at the request of the ------------ ----------- Borrower, or is otherwise made at the request of the Borrower, the $2,500 fee shall be paid by the Borrower. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment, Revolving Loans, Swing Line Interest and L/C Interest under the applicable assignment agreement are "plan 94 assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the date such assignment becomes effective, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto and thereto, and the transferor Lender shall be released with respect to the percentage of the Aggregate Commitment, Revolving Loans, Swing Line Interest and L/C Interest assigned to such Purchaser without any further consent or action by TLGI, the Borrower, the Lenders, the L/C Issuer or the Agent being required. Upon the consummation of any assignment to a Purchaser pursuant to this Section ------- 13.3.2, the transferor Lender, the Agent and the Borrower shall make ------ appropriate notations in their respective records to reflect the principal amounts reflecting its Commitment, as adjusted pursuant to such assignment. In connection with the foregoing, the Agent shall maintain at its address referred to in Section 14.1 a copy of each ------------ Notice of Assignment delivered to it and a register (the "Register") -------- for the recordation of the names and addresses of the Lenders, the Commitments of such Lenders, the principal amount of each Type of Revolving Loan owing to each such Lender from time to time and the principal amount of each Swing Line Loan owing to the Swing Line Lender from time to time. The entries in the Register shall be conclusive, in the absence of clearly demonstrable error, and TLGI, the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Revolving Loans and the Swing Line Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by TLGI, the Borrower, or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Agent shall give prompt written notice to the Borrower of the making of any entry in the Register or any change in any such entry. 13.4. Dissemination of Information. Each of TLGI and the Borrower ---------------------------- authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such ---------- Lender's possession concerning the creditworthiness of TLGI and the Borrower and the other Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 10.15. ------------- 13.5. Tax Treatment. If any interest in any Loan Document is ------------- transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.17. ------------ 95 ARTICLE XIV NOTICES 14.1. Giving Notice. Except as otherwise permitted by Section ------------- ------- 2.13(d) with respect to Revolving Loans and Section 2.27(d) with respect to - ------- --------------- Swing Line Loans, all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes). 14.2. Change of Address. The Borrower, TLGI, the Agent, the L/C ----------------- Issuer and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XV COLLATERAL TRUST AGREEMENT 15.1. Appointment of Secured Party Representative. Each Lender ------------------------------------------- hereby irrevocably appoints the Agent as its Secured Party Representative under (and as defined in) the Collateral Trust Agreement to serve for so long as the Agent shall be the Agent hereunder. 15.2 Appointment of Enforcement Representatives. Whenever the ------------------------------------------ Lenders shall be entitled to vote on the selection of one or more Enforcement Representatives under (and as defined in) the Collateral Trust Agreement, the Agent shall cast on behalf of all of the Lenders all of the votes to which the Lenders are entitled for (x) such natural person as the Agent shall select (who may be, but need not be, an employee or officer of the Agent), and (y) such other natural persons, if any, as shall have been selected by a vote of the Required Lenders; provided that by a vote of the Required Lenders any such Enforcement Representative (including the Enforcement Representative selected by the Agent) may be replaced. 15.3. Actions of Lenders. Any actions, including votes, to be taken ------------------ by the Lenders under the terms of the Collateral Trust Agreement (whether in respect of releases of collateral, enforcement actions, amendments, waivers or otherwise) shall in all respects be subject to the terms of this Agreement (including, without limitation, Section 9.2). ----------- 96 IN WITNESS WHEREOF, the Borrower, TLGI, the Lenders, the L/C Issuer and the Agent have executed this Agreement as of the date first above written. LOEWEN GROUP INTERNATIONAL, INC. By:________________________________ Print Name: Dwight K. Hawes Title: Vice President, Finance Address: Loewen Group International, Inc. 50 East River Center Boulevard Suite 820 Covington, Kentucky 51011 U.S.A Attention: Vice President, Finance Facsimile No.: (606) 431-8894 with a copy to: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia V5G 3S8 Canada Attention: Vice President, Finance Facsimile No.: (604) 473-7305 S-1 THE LOEWEN GROUP INC. By:_____________________________________ Print Name: Dwight K. Hawes Title: Vice President, Finance Address: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia V5G 3S8 Canada Attention: Vice President, Finance Facsimile No.: (604) 473-7305 BANK OF MONTREAL, as Agent, L/C Issuer and Swing Line Lender By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 115 South LaSalle Street 12th Floor Chicago, Illinois 60603 Attention: Michael D. Pincus Facsimile No.: (312) 750-6057 S-2 LENDERS ALLIED IRISH BANKS, p.l.c. CAYMAN ISLANDS BRANCH By:_____________________________________ Print Name:_____________________________ Title:__________________________________ By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 405 Park Avenue New York, New York 10022 Facsimile: (212) 339-8007 BANK BRUSSELS LAMBERT, NEW YORK BRANCH By:_____________________________________ Print Name:_____________________________ Title:__________________________________ By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 630 Fifth Avenue New York, New York 10111 Facsimile: (212) 333-5786 S-3 BANK OF IRELAND - GRAND CAYMAN BRANCH By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 640 Fifth Avenue New York, New York 10019 Facsimile: (212) 307-5559 BANK OF MONTREAL By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 115 South LaSalle Street 11th Floor Chicago, Illinois 60603 Facsimile: (312) 750-6057 THE BANK OF NEW YORK By:_____________________________________ Print Name:_____________________________ Title:__________________________________ Address: 10990 Wilshire Boulevard Suite 1125 Los Angeles, California 90024 Facsimile: (310) 996-8667 S-4 CAISSE NATIONALE DE CREDIT AGRICOLE By:_________________________________ Print Name:_________________________ Title:______________________________ Address: 55 East Monroe Street Suite 4700 Chicago, Illinois 60603 Facsimile: (312) 372-3724 CIBC INC. By:__________________________________ Print Name: Howard A. Palmer Title: Director Address: 425 Lexington Avenue New York, New York 10017 Facsimile: (212) 856-3763 COMERICA BANK By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 500 Woodward Avenue 23rd Floor Detroit, Michigan 48226 Facsimile: (313) 964-4765 S-5 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A. "RABOBANK NEDERLAND", NEW YORK BRANCH By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 300 South Wacker Drive Suite 3500 Chicago, Illinois 60606 Facsimile: (312) 408-8240 CORESTATES BANK, N.A. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 1339 Chestnut Street FC 1-8-3-16 Philadelphia, Pennsylvania 19107 Facsimile: (215) 973-6745 THE DAI-ICHI KANGYO BANK, LTD. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: One World Trade Center 48th Floor New York, New York 10048 Facsimile: (212) 488-8955 S-6 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By:__________________________________ Print Name:__________________________ Title:_______________________________ By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 31 West 52nd Street New York, New York 10019 Attention: Stephan Wiedemann Facsimile: (212) 474-8212 THE FUJI BANK, LIMITED By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 225 West Wacker Drive Chicago, Illinois 60606 Facsimile: (312) 621-0539 HIBERNIA NATIONAL BANK By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 313 Carondelet Street New Orleans, Louisiana 70130 Facsimile: (504) 533-5344 S-7 MELLON BANK, N.A. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: One Mellon Bank Center 500 Grant Street Room 4412 Pittsburgh, Pennsylvania 15258 Facsimile: (412) 234-8888 THE MITSUBISHI TRUST AND BANKING CORPORATION, CHICAGO BRANCH By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 311 South Wacker Drive Suite 6300 Chicago, Illinois 60606 Facsimile: (312) 663-0863 PEARL STREET L.P. By:__________________________________ Print Name:__________________________ Title: Authorized Signatory Address: 85 Broad Street New York, New York 10004 Facsimile: (212) 902-3757 S-8 ROYAL BANK OF CANADA By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: Grand Cayman (North America No. 1) Branch c/o New York Branch Financial Square, 23rd Floor New York, New York 10005-3531 Attention: Manager, Credit Administration Facsimile: (212) 968-1295 with a copy to: Royal Bank of Canada One North Franklin Street, Suite 700 Chicago, Illinois 60606 Attention: Karen T. Hull, Manager Facsimile: (312) 551-0805 THE SAKURA BANK, LIMITED NEW YORK BRANCH By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 277 Park Avenue 45th Floor New York, New York 10172 Facsimile: (212) 888-7651 S-9 THE SANWA BANK, LIMITED, ATLANTA AGENCY By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: Georgia-Pacific Center, Suite 4950 133 Peachtree Street, N.E. Atlanta, Georgia 30303 Facsimile:___________________________ U.S. BANK OF WASHINGTON, N.A. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 1420 5th Avenue - WWH 276 Seattle, Washington 98101 Facsimile: (206) 587-5259 WACHOVIA BANK OF GEORGIA, N.A. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 191 Peachtree Street Atlanta, Georgia 30303 Facsimile: (404) 332-6898 S-10 WELLS FARGO BANK, N.A. By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 707 Wilshire Boulevard MAC 2818-161 Los Angeles, California 90017 Facsimile: (213) 614-2569 THE YASUDA TRUST AND BANKING COMPANY LIMITED NEW YORK BRANCH By:__________________________________ Print Name:__________________________ Title:_______________________________ Address: 666 Fifth Avenue Suite #801 New York, New York 10103 Facsimile: (212) 373-5796 S-11 SCHEDULE 1 DISCLOSURE SCHEDULE ================================================================================================== Section 6.7 Litigation (a) Litigation of the type described in the first None sentence of Section 6.7 (b) Material Contingent Liabilities not provided for or None disclosed in the financial statements for the year ended December 31, 1995 - -------------------------------------------------------------------------------------------------- Section 6.8 List of subsidiaries Attached - -------------------------------------------------------------------------------------------------- Section 6.14 List of all Properties to which TLGI, the Borrower, or None any subsidiary listed in 6.8 above does not have good title, free of all Liens other than those permitted by Section 7.18, to all of the property and assets reflected as owned by it in their financial statements - -------------------------------------------------------------------------------------------------- Section 7.2 Indebtedness to be Paid See Annex 1 - -------------------------------------------------------------------------------------------------- Section 7.11 Debt of Subsidiaries Attached - -------------------------------------------------------------------------------------------------- Section 7.16 Investments (a) List of investments of TLGI at March 31, 1995 Attached (b) The only investments on the list described in item (a) above which concern matters outside of TLGI's defined line of business are: (i) The WLSP Contingent obligation with a balance of $99,600 at December 31, 1995 (ii) The Bayview Acquisition Inc. notes with a balance of $806,535 at December 31, 1995 - -------------------------------------------------------------------------------------------------- Section 7.18(f) Schedule of Existing Liens Attached ==================================================================================================
SCHEDULE 2 APPLICABLE MARGINS AND APPLICABLE COMMITMENT AND LETTER OF CREDIT FEE RATES/*/ -
==================================================================================================================================== LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V ------- -------- --------- -------- ------- - ------------------------------------------------------------------------------------------------------------------------------------ Credit Quality: If TLGI's long-term If TLGI's long-term If TLGI's long-term If TLGI's long-term If TLGI's long- senior unsecured senior unsecured and senior unsecured and senior unsecured and term senior and unenhanced debt unenhanced debt is unenhanced debt is unenhanced debt is unsecured and is rated at least rated BBB or BBB+ rated BBB- by rated BB+ by unenhanced debt A- by Standard & by Standard & Poor's Standard & Poor's Standard & Poor's is rated BB or Poor's and Duff & and Duff & Phelps and Duff & Phelps below by Standard & Poor's and Duff Phelps and A3 by and Baa2 or Baa1 and Baa3 by Moody's. and Duff & Phelps & Phelps and Ba2 Moody's. by Moody's. Ba1 by Moody's. or below by Moody's - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Applicable 12.5 basis Commitment Fee points ("bp") 18.75 bp 25 bp 25 bp 37.5 bp Rate: - ------------------------------------------------------------------------------------------------------------------------------------ Applicable Letter of Credit Fee Rate: - ------------------------------------------------------------------------------------------------------------------------------------ A. Usage less than 65% 30 bp 40 bp 55 bp 87.5 bp 112.5 bp - ------------------------------------------------------------------------------------------------------------------------------------ B. Usage greater than 65%/**/ 30 bp 47.5 bp 62.5 bp 95 bp 120 bp -- - ------------------------------------------------------------------------------------------------------------------------------------ Applicable Margin: - ------------------------------------------------------------------------------------------------------------------------------------ A. Usage less than 65% - ------------------------------------------------------------------------------------------------------------------------------------ ABR + 0 bp 0 bp 0 bp 0 bp 0 bp - ------------------------------------------------------------------------------------------------------------------------------------ LIBOR + 30 bp 40 bp 55 bp 87.5 bp 112.5 bp - ------------------------------------------------------------------------------------------------------------------------------------ CD + 42.5 bp 52.5 bp 72.5 bp 100 bp 125 bp - ------------------------------------------------------------------------------------------------------------------------------------ B. Usage greater than 65%/**/ -- - ------------------------------------------------------------------------------------------------------------------------------------ ABR + 0 bp 0 bp 0 bp 0 bp 7.5 bp - ------------------------------------------------------------------------------------------------------------------------------------ LIBOR + 30 bp 47.5 bp 62.5 bp 95 bp 120 bp - ------------------------------------------------------------------------------------------------------------------------------------ CD + 42.5 bp 60 bp 80 bp 107.5 bp 132.5 bp ====================================================================================================================================
Notes: (1) For purposes of the Pricing Grid, an implied senior unsecured and unenhanced debt rating is equivalent to a long-term senior unsecured and unenhanced debt rating. If TLGI is split-rated, then pricing will be determined by reference to any rating category described on the Pricing Grid into which the ratings in effect from at least two of the three rating agencies fall or if the ratings of the three rating agencies are spread across three rating categories, by reference to the middle of the three ratings. If only two ratings are available, then pricing will be determined by reference to such two ratings, or in the case of a split rating, the lower of such two ratings, and if only one rating is available, then pricing will be determined by that rating; provided, however, that if only one rating is available -------- ------- and such rating is from Duff & Phelps, then TLGI shall be deemed to be in the lowest rating category described on the Pricing Grid (Level V). If TLGI has no long-term senior unsecured and unenhanced debt rating or implied senior unsecured and unenhanced debt rating from Standard & Poor's, Moody's or Duff & Phelps, it shall be deemed to be in the lowest rating category described on the Pricing Grid (Level V). (2) Whenever used in the Pricing Grid, (x) the term "Usage gteater than 65%" shall mean, with respect to a time, that the sum (without duplication) of (i) all Revolving Loans outstanding at such time, plus (ii) all Swing Line Loans outstanding at such ---- time, plus (iii) the aggregate L/C Obligations at such ---- time shall be less than the product of 0.65 and the Aggregate Commitment at such time, and (y) the term "Usage greater than 65%" shall mean, with respect to a time, that the sum (without duplication) of (i) all Revolving Loans outstanding at such time, plus (ii) all Swing Line Loans outstanding at such time, plus ---- ---- (iii) the aggregate L/C Obligations at such time shall be greater than or equal to the product of 0.65 and the Aggregate Commitment at such time. */ During the period from the Effective Date through December 31, 1996, the - - determination for all purposes of the Applicable Commitment Fee Rate, the Applicable Letter of Credit Fee Rate and the Applicable Margin shall be made using the prices set forth under the heading designated Level V. **/ When usage exceeds 65%, the Applicable Letter of Credit Fee indicated - -- applies to all outstanding Letters of Credit and the Applicable Margin indicated applies to all outstanding Revolving Loans and Swing Line Loans bearing interest at a rate computed using the Applicable Margin. SCHEDULE 3 SENIOR OBLIGATIONS MEIP CREDIT AGREEMENT - aggregate principal amount outstanding of U.S. $116,006,970 of Loewen Management Investment Corporation as agent for Borrower on May 17, 1996, guaranteed by TLGI. ROYAL BANK OF CANADA CREDIT AGREEMENT - aggregate principal committed amount of Cdn. $50,000,000 of TLGI of which Cdn. $41,551,391 was outstanding on May 17, 1996, guaranteed by Borrower. DRESDNER BANK CREDIT AGREEMENT - aggregate principal amount outstanding of Cdn.$20,000,000 of TLGI on May 17, 1996, guaranteed by Borrower. - aggregate principal amount outstanding of Cdn.$15,000,000 of TLGI on May 17, 1996, guaranteed by Borrower. SERIES A NOTES - the Senior Guaranteed Notes, Series A dated October 30, 1991 in - -------------- the original aggregate principal amount of U.S.$100,000,000 issued by Borrower pursuant to the Note Agreements dated for reference October 1, 1991 of Borrower and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $75,000,000 on May 17, 1996. SERIES B NOTES - the Senior Guaranteed Notes, Series B dated October 30, 1991 in - -------------- the original aggregate principal amount of U.S.$50,000,000 issued by Borrower pursuant to the Note Agreements dated for reference October 1, 1991 of Borrower and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $42,850,000 on May 17, 1996. SERIES C NOTES - the Senior Guaranteed Notes, Series C dated October 30, 1991 in - -------------- the original aggregate principal amount of U.S.$25,000,000 issued by TLGI pursuant to the Note Agreements dated for reference October 1, 1991 of Borrower and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $18,750,000 on May 17, 1996. SERIES D NOTES - the Senior Guaranteed Notes, Series D dated September 10, 1993 - -------------- in the original aggregate principal amount of U.S. $60,000,000 issued by TLGI pursuant to the Note Agreements dated for reference September 1, 1993 of TLGI and Borrower with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $60,000,000 on May 17, 1996. SERIES E NOTES - the Senior Guaranteed Notes, Series E dated February 24, 1994 - -------------- in the original aggregate principal amount of U.S. $50,000,000 issued by Borrower pursuant to the Note Agreements dated for reference February 1, 1994 of Borrower and TLGI with the Purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $50,000,000 on May 17, 1996. TLGI SERIES A AND B NOTE GUARANTEE - the Guaranty Agreement dated for reference - ---------------------------------- October 1, 1991 pursuant to which TLGI guarantees the due and punctual payment of the indebtedness and performance of the obligations of Borrower as issuer of the Series A Notes and the Series B Notes described above under the terms of such Notes and under the related Note Agreements. BORROWER SERIES C NOTE GUARANTEE - the Guaranty Agreement dated for reference - -------------------------------- October 1, 1991 pursuant to which Borrower guaranteed the due and punctual payment of the indebtedness and performance of the obligations of TLGI as issuer of the Series C Notes described above under the terms of such Notes and under the related Note Agreements. BORROWER SERIES D NOTE GUARANTEE - the Guaranty Agreement dated for reference - -------------------------------- April 1, 1993 pursuant to which Borrower guarantees the due and punctual payment of the indebtedness and the performance of the obligations of TLGI as issuer of the Series D Notes described above under the terms of such Notes and under the related Note Agreements. TLGI SERIES E NOTE GUARANTEE - the Guaranty Agreement dated for reference - ---------------------------- February 1, 1994 pursuant to which TLGI guarantees the due and punctual payment of the indebtedness and the performance of the obligations of Borrower as issuer of the Series E Notes described above under the terms of such Notes and under the related Note Agreements. SERIES 1 NOTES - the Series 1 Senior Guaranteed Notes dated March 20, 1996 in - -------------- the original aggregate principal amount of U.S. $225,000,000 issued by Borrower pursuant to the Indenture dated as of March 20, 1996 among Borrower, TLGI and Fleet National Bank of Connecticut, as trustee, and guaranteed by Borrower pursuant to such Indenture, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $225,000,000 on May 17, 1996. SERIES 2 NOTES - the Series 2 Senior Guaranteed Notes dated March 20, 1996 in - -------------- the original aggregate principal amount of U.S. $125,000,000 issued by Borrower pursuant to the Indenture dated as of March 20, 1996 among Borrower, TLGI and Fleet National Bank of Connecticut, as trustee, and guaranteed by Borrower pursuant to such Indenture, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $125,000,000 on May 17, 1996. 2 SCHEDULE 4 PLEDGOR SUBSIDIARY OPINIONS 1. RUSSELL & DUMOULIN (Canada Federal, British Columbia) - The Loewen Group Inc. - TLGI Management Corp. - Neweol Investments Ltd. 2. THELEN, MARRIN, JOHNSON & BRIDGES (U.S. Federal, New York, Delaware corporate) - The Loewen Group Inc. - Loewen Group International Inc. 3. JONES, DAY, REAVIS & POGUE (California) - Loewen (Texas), Inc. 4. MOORE & VAN ALLEN, PLLC (North Carolina) - Carothers Holding Company, Inc. 5. RUDEN, MCCLOSKY, SMITH, SCHUSTER & RUSSELL, P.A. (Florida) - Kraeer Holdings, Inc. - MHI Group, Inc. 6. STRADLEY, RONON, STEVENS & YOUNG (Pennsylvania) - Osiris Holding Corporation 7. DOWLING, MAGARIAN, AARON & HEYMAN (California) - Whitehurst California 8. BUTLER, SNOW, O'MARA, STEVENS & CANAADA, PLLC (Mississippi) - Riemann Holdings, Inc. 9. ADAMS KLEEMEIER HAGAN HANNAH & FOUTS (North Carolina) - Lineberry Group, Inc. 10. LONG, ALDRIDGE & NORMAN (Georgia) - Loewen (Georgia) Inc. 11. BOGLE & GATES P.L.L.C. (Washington) - Malletta-Vertin Holdings Inc. - S & H Properties and Enterprises, Inc. 12. KAPLAN, STRANGIS & KAPLAN (Minnesota) - Kapala-Glodek Funeral Service, Ltd. 13. CAPPS, CANTWELL & CAPPS (Tennessee) - Family Funeral Service Group, Inc. 2 SCHEDULE 5 ---------- Commitments of the Lenders --------------------------
Commitment Agent and Documentation Agent - ---------- ----------------------------- $132,500,000 Bank of Montreal 97,500,000 Pearl Street L.P. Co-Agents --------- 40,000,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", New York Branch 35,000,000 CIBC Inc. 35,000,000 The Fuji Bank, Limited 35,000,000 Wachovia Bank of Georgia, N.A. 35,000,000 Wells Fargo Bank, N.A. Lenders ------- 25,000,000 Bank Brussels Lambert, New York Branch 25,000,000 The Bank of New York 25,000,000 CoreStates Bank, N.A. 25,000,000 Deutsche Bank AG, New York Branch and/or Cayman Islands Branch 25,000,000 Hibernia National Bank 25,000,000 The Mitsubishi Trust and Banking Corporation, Chicago Branch 25,000,000 Royal Bank of Canada 25,000,000 The Sanwa Bank, Limited, Atlanta Agency
20,000,000 Comerica Bank 15,000,000 Allied Irish Banks, p.l.c. Cayman Islands Branch 15,000,000 Bank of Ireland - Grand Cayman Branch 15,000,000 Caisse Nationale de Credit Agricole 15,000,000 The Dai-Ichi Kangyo Bank, Ltd. 15,000,000 Mellon Bank, N.A. 15,000,000 The Sakura Bank, Limited New York Branch 15,000,000 The Yasuda Trust and Banking Company Limited New York Branch 15,000,000 U.S. Bank of Washington, N.A.
2 SCHEDULE 6 CERTAIN PLEDGED SHARES SUBJECT TO TRANSFER RESTRICTIONS Shares of the following Subsidiaries: (a) Eagan Holding Company Limited (b) Leitz-Eagan Funeral Home, Inc. (c) New Orleans Limousine Service, Inc. (d) Acadian Life Insurance Company (e) Administrative Resources Company, Inc. (f) First Capital Life Insurance Company of Louisiana (g) Planned Funeral Services, Inc. EXHIBIT A FORM OF REVOLVING NOTE [Date] LOEWEN GROUP INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of ____________________ (the "Lender") - --------- ------ the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to Article II of the Credit Agreement hereinafter ---------- referred to (as the same may be amended or modified, the "Agreement"; capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement), in immediately available funds on the dates and at the offices of Bank of Montreal, as Agent, specified in the Agreement, together with interest on the unpaid principal amount hereof at the rates determined in accordance with the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Revolving Loans in full on the Facility Termination Date. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Revolving Loan and the date and amount of each principal payment hereunder. This Revolving Note is one of the Revolving Notes issued pursuant to Section 13.1 of, and is entitled to the benefits of, the Credit Agreement, dated - ------------ as of May 15, 1996, among the Borrower, TLGI, Bank of Montreal, as Agent, L/C Issuer and Swing Line Lender, and the lenders parties thereto, including the Lender, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Revolving Note, including the terms and conditions under which this Revolving Note may be prepaid or its maturity date accelerated. The Agreement, among other things, provides for the making of "Revolving Loans" by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the Lender's Commitment. The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Revolving Note shall be governed by, and construed in accordance with, the laws of the State of New York, United States. LOEWEN GROUP INTERNATIONAL, INC By:_______________________________ Dwight K. Hawes Vice President, Finance 2 Schedule of Revolving Loans and Payments of Principal to Revolving Note of Loewen Group International, Inc., Dated __________, ____
Principal Amount Maturity of Principal Date of Revolving Loan Interest Period Amount Paid Unpaid Balance ---- ----------------- --------------- ----------- --------------
3 EXHIBIT B REQUIRED OPINIONS Forms of opinions of Thelen, Marrin, Johnson & Bridges (U.S. Federal, New York and Delaware corporate counsel) and Russell & DuMoulin (Canada Federal and British Columbia counsel) are attached hereto as Attachments 1 and 2, respectively. EXHIBIT C FORM OF COMPLIANCE CERTIFICATE To: The Lenders Party To The Credit Agreement Described Below This Compliance Certificate is furnished pursuant to that certain Credit Agreement dated as of May 15, 1996 (as amended, modified, renewed or extended from time to time, the "Agreement") among the Borrower, TLGI, the --------- Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _____ of [TLGI] [the Borrower] and the Chief Financial Officer; 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of TLGI and its Subsidiaries and of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements; 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or Unmatured Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; 4. Schedule I attached hereto sets forth financial data and computations evidencing TLGI's compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct; and 5. Schedule II attached hereto sets forth a description of all matters described in Section 7.3 of the Agreement (including, without limitation, clauses (a), (b), (c) and (d) thereof) which have been disclosed, or ----------- --- --- --- which should have been disclosed, pursuant to the terms of Section 7.3 of the Agreement during the period from the date of the last Compliance Certificate delivered to the Lenders through the date hereof (which description may consist of copies of notices previously given to the Lenders to the extent applicable). Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which TLGI or the Borrower, as applicable, has taken, is taking, or proposes to take with respect to each such condition or event: ____________________________________________________________ ____________________________________________________________ The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this _________ day of __________, __. By:_____________________________________ Name:___________________________________ Title:__________________________________ 2 SAMPLE SCHEDULE I TO COMPLIANCE CERTIFICATE Schedule of Compliance as of _________________ with Provisions of _____ and _____ of the Agreement SAMPLE SCHEDULE II TO COMPLIANCE CERTIFICATE Description of Matters Disclosable Pursuant to the Provisions of Section 7.3 of the Agreement EXHIBIT D FORM OF ASSIGNMENT AGREEMENT This Assignment Agreement (this "Assignment Agreement") between -------------------- __________ (the "Assignor") and ___________ (the "Assignee") is dated as of -------- -------- _____________, ____. The parties hereto agree as follows: 1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit --------------------- Agreement (which, as it may be amended, modified, renewed or extended from time to time is herein called the "Credit Agreement") described in Item 1 of Schedule ---------------- I attached hereto ("Schedule I"). Capitalized terms used herein and not ---------- otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns ------------------------- to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule I of all outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule I and the other Loan Documents. The Commitment (or, if the applicable Commitment has been terminated, the aggregate Revolving Loans, Swing Line Interest and L/C Interest) purchased by the Assignee hereunder is set forth in Items 3 and 4 of Schedule I. 3. EFFECTIVE DATE. The effective date of this Assignment Agreement -------------- (the "Assignment Effective Date") shall be the later of the date specified in ------------------------- Item 5 of Schedule I or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Exhibit I attached hereto has been delivered to the Agent. Such Notice of Assignment must include any consents required to be delivered to the Agent by Section 13.3.1 of the Credit Agreement. In no event will the Assignment Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Assignment Effective Date under Sections 4 and 5 hereof are not made on the ---------- - proposed Assignment Effective Date. The Assignor will notify the Assignee of the proposed Assignment Effective Date no later than the Business Day prior to the proposed Assignment Effective Date. As of the Assignment Effective Date, (a) the Assignee shall have the rights and obligations of a Lender under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (b) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder. 4. PAYMENTS OBLIGATIONS. On and after the Assignment Effective -------------------- Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to all Revolving Loans and, to the extent applicable, the Swing Line Interest and L/C Interest, made on or after the Assignment Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment of Revolving Loans and, to the extent applicable, the Swing Line Interest and L/C Interest hereunder, (a) the Assignee shall pay the Assignor, on the Assignment Effective Date, an amount equal to the principal amount of the portion of all Floating Rate Loans assigned to the Assignee hereunder plus, if applicable, the amount which corresponds to the principal amount of Swing Line Loans represented by the Swing Line Interest assigned to the Assignee hereunder and the amount which corresponds to the liability of the L/C Issuer in respect of outstanding Letters of Credit represented by the L/C Interest assigned to the Assignee hereunder and (b) with respect to each Fixed Rate Loan made by the Assignor and assigned to the Assignee hereunder which is outstanding on the Assignment Effective Date, on the earliest of (i) the last day of the Interest Period therefor, (ii) such earlier date agreed to by the Assignor and the Assignee and (iii) the date on which any such Fixed Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (such earliest date being hereinafter referred to as the "Payment ------- Date"), the Assignee shall pay the Assignor an amount equal to the principal - ---- amount of the portion of such Fixed Rate Loan assigned to the Assignee which is outstanding on the Payment Date. If the Assignor and the Assignee agree that the Payment Date for such Fixed Rate Loan shall be the Assignment Effective Date, they shall agree to the interest rate applicable to the portion of such Revolving Loan assigned hereunder for the period from the Assignment Effective Date to the end of the existing Interest Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest received by the Assignee in -------------------- excess of the Agreed Interest Rate shall be remitted to the Assignor. In the event interest for the period from the Assignment Effective Date to but not including the Payment Date is not paid by the Borrower with respect to any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to the Assignor interest for such period on the portion of such Fixed Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate provided by the Credit Agreement. In the event a prepayment of any Fixed Rate Loan which is existing on the Payment Date and assigned by the Assignor to the Assignee hereunder occurs after the Payment Date but before the end of the Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to the Assignor the excess of the prepayment penalty paid with respect to the portion of such Fixed Rate Loan assigned to the Assignee hereunder over the amount which would have been paid if such prepayment penalty were calculated based on the Agreed Interest Rate. The Assignee will also promptly remit to the Assignor (a) any principal payments received from the Agent with respect to Fixed Rate Loans prior to the Payment Date and (b) any amounts of interest on Revolving Loans, Swing Line Loans, Reimbursement Obligations and fees received from the Agent which relate to the portion of the Revolving Loans and, to the extent applicable, the Swing Line Interest and L/C Interest assigned to the Assignee hereunder for periods prior to the Assignment Effective Date, in the case of Floating Rate Loans, Swing Line Loans and Reimbursement Obligations, or the Payment Date, in the case of Fixed Rate Loans, and not 2 previously paid by the Assignee to the Assignor.]/*/ In the event that either - party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto. 5. FEES PAYABLE BY THE ASSIGNEE. The Assignee agrees to pay __% of ---------------------------- the recordation fee required to be paid to the Agent in connection with this Assignment Agreement. 6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S -------------------------------------------------------------- LIABILITY. The Assignor represents and warrants that it is the legal and - --------- beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (a) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation documents granting the Assignor and the other Lenders a security interest in assets of the Borrower or any guarantor, (b) any representation, warranty or statement made in or in connection with any of the Loan Documents, (c) the financial condition or creditworthiness of the Borrower or any guarantor, (d) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (e) inspecting any of the Property, books or records of the Borrower, (f) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Obligations or (g) any mistake, error of judgment or action taken or omitted to be taken in connection with the Revolving Loans, Swing Line Loans, Letters of Credit or the Loan Documents. 7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (a) confirms that ------------------------------- it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (b) agrees that it will, independently and without reliance upon the Agent, the L/C Issuer, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (c) appoints and authorizes each of the Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent and the Collateral Agent, respectively, by the terms thereof, together with such powers as are reasonably incidental thereto, (d) agrees that it will perform in accordance with their _______________________ /*/ Each Assignor may insert its standard payment provisions in lieu of - the foregoing payment terms. 3 terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, (e) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule I [,] [and] (e) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are "plan assets" as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA [and (f) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes]./**/ -- 8. INDEMNITY. The Assignee agrees to indemnify and hold the --------- Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's non- performance of the obligations assumed under this Assignment Agreement. 9. SUBSEQUENT ASSIGNMENTS. After the Assignment Effective Date, the ---------------------- Assignee shall have the right pursuant to Section 13.3.1 of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any Person, provided that (a) any such subsequent assignment does not violate any of the terms and conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (b) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under Sections 4, 5 and 8 hereof. ---------- - - 10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the ---------------------------------- Aggregate Commitment occurs between the date of this Assignment Agreement and the Assignment Effective Date, the percentage interest specified in Item 3 of Schedule I shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Aggregate Commitment. 11. ENTIRE AGREEMENT. This Assignment Agreement and the attached ---------------- Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 12. GOVERNING LAW. This Assignment Agreement shall be governed by ------------- the internal law, and not the law of conflicts, of the State of New York. _____________________ /**/ To be inserted if the Assignee is not incorporated under the laws of -- the United States, or a state thereof. 4 13. NOTICES. Notices shall be given under this Assignment Agreement ------- in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the addresses set forth in the attachment to Schedule I. 5 IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By:_____________________________________ Name:___________________________________ Title:__________________________________ [Address]_______________________________ ________________________________________ [NAME OF ASSIGNEE] By:_____________________________________ Name:___________________________________ Title:__________________________________ [Address]_______________________________ ________________________________________ 6 SCHEDULE I to Assignment Agreement 1. Description and Date of Credit Agreement: Credit Agreement, dated as of May 15, 1996, among Loewen International Group, Inc., The Loewen Group Inc., the various lenders parties thereto as Lenders and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for the Lenders 2. Date of Assignment Agreement: _________, __ 3. Assignee's Percentage of Aggregate Commitment (As of ____%/**/ -- Date of Item 2 above)/*/ - 4. Assignee's Commitment Amount Purchased Hereunder: a. Assignee's Revolving $______ Loan Amount/*/ - b. Amount of Assigned Share of $______ Swing Line Loans c. Amount of Assigned Share of L/C $______ Obligations _______________________ */ If the Commitment has been terminated, insert outstanding Revolving - - Loans in 4(a) below in place of Commitment. **/ Percentage taken to 10 decimal places. - -- 5. Proposed _________________ Assignment Effective Date: Accepted and Agreed: [NAME OF ASSIGNOR] By:_____________________________________ Name:___________________________________ Title:__________________________________ [NAME OF ASSIGNEE] By:_____________________________________ Name:___________________________________ Title:__________________________________ 2 Attachment to SCHEDULE I to ASSIGNMENT AGREEMENT Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee EXHIBIT I to Assignment Agreement FORM OF NOTICE OF ASSIGNMENT ___________________, __ To: Loewen Group International, Inc. ___________________________ ___________________________ Bank of Montreal, as Agent ___________________________ ___________________________ From: [NAME OF ASSIGNOR] (the "Assignor") [NAME OF ASSIGNEE] (the "Assignee") 1. We refer to the Credit Agreement (as it may be amended, modified, renewed or extended from time to time, the "Credit Agreement") described in Item ---------------- 1 of Schedule I attached hereto ("Schedule I"). Capitalized terms used herein ---------- and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. This Notice of Assignment (this "Notice") is given and delivered ------ to the Borrower and the Agent pursuant to Section 13.3.2 of the Credit Agreement. 3. The Assignor and the Assignee have entered into an Assignment Agreement, dated as of ________________, __ (the "Assignment"), pursuant to ---------- which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor, the percentage interest specified in Item 3 of Schedule I of all outstandings, rights and obligations under the Credit Agreement relating to the facilities listed in Item 4 of Schedule I. The "Assignment Effective Date" of the Assignment shall be the later of the date ------------------------- specified in Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents and fees required by Sections 13.3.1 and 13.3.2 of the Credit Agreement have been delivered to the Agent, provided that the Assignment Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied. 4. The Assignor and the Assignee hereby give to the Borrower and the Agent notice of the assignment and delegation referred, to herein. The Assignor will confer with the Agent before the date specified in Item 5 of Schedule I to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 --------- hereof, and will confer with the Agent to determine the Assignment Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall --------- notify the Agent if the Assignment Agreement does not become effective on any proposed Assignment Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written confirmation of the satisfaction of the conditions precedent. 5. The Assignor or the Assignee shall pay to the Agent on or before the Assignment Effective Date the processing fee of $2,500 required by Section 13.3.2 of the Credit Agreement (except to the extent otherwise provided in Section 13.3.2). - -------------- 6. If Revolving Loans or Swing Line Loans are outstanding on the Assignment Effective Date, the Assignor and the Assignee request and direct that the Agent make appropriate notations in the Register or its other records reflecting the Assignment of such Revolving Loans and participations in such Swing Line Loans and, if applicable, the related Commitment. 7. The Assignee advises the Agent that its notice and payment instructions are set forth in the attachment to Schedule I. 8. The Assignee hereby represents and warrants that none of the funds, monies, assets or other consideration being used to make the purchase pursuant to the Assignment are "plan assets" as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA. 2 9. The Assignee authorizes the Agent to act as its agent under the Loan Documents in accordance with the terms thereof. The Assignee acknowledges that the Agent has no duty to supply information with respect to the Borrower, any guarantor or the Loan Documents to the Assignee until the Assignee becomes a party to the Credit Agreement./*/ - NAME OF ASSIGNOR NAME OF ASSIGNEE By:_________________________________ By:_________________________________ Name:_______________________________ Name:_______________________________ Title:______________________________ Title:______________________________ ACKNOWLEDGED [AND [ACKNOWLEDGED AND CONSENTED TO]/**/ BY BANK OF CONSENTED TO BY THE LOEWEN -- GROUP INTERNATIONAL, INC. MONTREAL, AS AGENT By:_________________________________ By:_________________________________ Name:_______________________________ Name:_______________________________ Title:______________________________ Title:_____________________________] (Attach photocopy of Schedule I to Assignment as Schedule I hereto] ____________________ /*/ This paragraph may be eliminated if the Assignee is a party to the - Credit Agreement prior to the Assignment Effective Date. /**/ Omit if consents are not required. -- 3 SCHEDULE I to Notice of Assignment 1. Description and Date of Credit Agreement: Credit Agreement, dated as of May 15, 1996, among Loewen International Group, Inc., The Loewen Group Inc., the various lenders parties thereto as Lenders and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for the Lenders 2. Date of Assignment Agreement: _________, __ 3. Assignee's Percentage of Aggregate Commitment (As of ____%/**/ -- Date of Item 2 above)/*/ - 4. Assignee's Commitment Amount Purchased Hereunder: a. Assignee's Revolving $______ Loan Amount/*/ - b. Amount of Assigned Share of $______ Swing Line Loans c. Amount of Assigned Share of L/C $______ Obligations ______________________ */ If the Commitment has been terminated, insert outstanding Revolving - - Loans in 4(a) below in place of Commitment. **/ Percentage taken to 10 decimal places. - -- 5. Proposed ________________ Assignment Effective Date: Accepted and Agreed: [NAME OF ASSIGNOR] By:___________________________________ Name:_________________________________ Title:________________________________ [NAME OF ASSIGNEE] By:___________________________________ Name:_________________________________ Title:________________________________ 2 Attachment to SCHEDULE I to ASSIGNMENT AGREEMENT Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee EXHIBIT E FORM OF REVOLVING LOAN/SWING LINE LOAN/ CREDIT RELATED MONEY TRANSFER INSTRUCTION To Bank of Montreal, as Agent (the "Agent") under the Credit Agreement Described Below. Re: Credit Agreement, dated as of May 15, 1996 (as the same may be amended or modified, the "Credit Agreement"), among Loewen Group ---------------- International, Inc., The Loewen Group Inc., the financial institutions party thereto as Lenders and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for the Lenders. Terms used herein and not otherwise defined shall have the meanings assigned thereto in the Credit Agreement. The Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Advances or Swing Line Loans or other extensions of credit from time to time until receipt by the Agent of a specific written revocation of such instructions by the Borrower signed by two Authorized Officers; provided, however, that the -------- ------- Agent may otherwise transfer funds as hereafter directed in writing by an Authorized Officer of the Borrower, it being understood that any change in standing wire transfer instructions for the transfer of funds shall only be made upon the written direction of two Authorized Officers of the Borrower. Facility Identification Number(s)______________________________________ Customer/Account Name__________________________________________________ Transfer Funds To______________________________________________________ ______________________________________________________ ______________________________________________________ For Account No.________________________________________________________ Reference/Attention To_________________________________________________ Authorized Officer (Customer Representative) Date_______________ _____________________________________ _______________________________________ (Please Print) (Signature) Lender Officer Name _____________________________________ _______________________________________ (Please Print) (Signature) (Deliver Completed Form to Credit Support Staff For Immediate Processing) EXHIBIT F FORM OF REVOLVING LOAN BORROWING NOTICE [Date] Bank of Montreal, as Agent 115 South LaSalle Street Chicago, Illinois 60603 Attention: Client Services Ladies and Gentlemen: The undersigned, Loewen Group International, Inc., refers to the Credit Agreement, dated as of May 15, 1996 (as amended, the "Credit Agreement", ---------------- the terms defined therein being used herein as therein defined), among the undersigned, The Loewen Group Inc., certain Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for said Lenders (in such capacity as Agent, the "Agent"). The undersigned hereby gives you notice, ----- irrevocably, pursuant to Section 2.6 of the Credit Agreement that the ----------- undersigned hereby requests an Advance under the Credit Agreement, and in that connection sets forth below the information relating to such Advance (the "Proposed Advance") as required by Section 2.6 of the Credit Agreement: ---------------- ----------- (a) The Revolving Loan Borrowing Date for the Proposed Advance is ____________________. (b) The aggregate amount of the Proposed Advance is $___________________. (c) The Proposed Advance is to be [a Floating Rate Advance] [a Fixed CD Rate Advance] [a Eurodollar Advance]. [(d)] [The Interest Period for the Proposed Advance is _ [months] [days].]/***/ --- The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Advance: _________________ /***/To be included if the Proposed Advance is to be a Fixed Rate Advance. The --- Interest Period should be specified in months in the case of a Eurodollar Advance and in days in the case of a Fixed CD Rate Advance. (A) The representations and warranties contained in Article VI of ---------- the Credit Agreement are correct in all material respects, before and after giving effect to the Proposed Advance and to the application of the proceeds therefrom, as though made on and as of such date; and (B) No Default or Unmatured Default has occurred and is continuing or would result from the Proposed Advance or from the application of the proceeds therefrom. Very truly yours, LOEWEN GROUP INTERNATIONAL, INC. By:_____________________________ Name:___________________________ Title:__________________________ EXHIBIT G FORM OF PREPAYMENT NOTICE [Date] Bank of Montreal, as Agent 115 South LaSalle Street Chicago, Illinois 60603 Attention: Client Services Ladies and Gentlemen: The undersigned, Loewen Group International, Inc., refers to the Credit Agreement, dated as of May 15, 1996 (as amended, the "Credit Agreement", ---------------- the terms defined therein being used herein as therein defined), among the undersigned, The Loewen Group Inc., certain Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for said Lenders (in such capacity as Agent, the "Agent"). The undersigned hereby gives you notice, ----- irrevocably, pursuant to Section 2.5 of the Credit Agreement, that the ----------- undersigned hereby elects to/*/: - prepay a Floating Rate Advance in aggregate principal amount of $_________________________ on _________________________, __[.][; and] prepay a Eurodollar Advance in aggregate principal amount of [specify amount] and with a current Interest Period ending on _______________, __ on _______________, __[.][; and] prepay a Fixed CD Rate Advance in aggregate principal amount of $_______________ and with a current Interest Period ending _______________, __ on _______________, __. Very truly yours, LOEWEN GROUP INTERNATIONAL, INC. By:______________________________ Name:____________________________ Title:___________________________ ____________________ /*/ Include one or more of the following, as applicable. - EXHIBIT H FORM OF EXTENSION REQUEST [Date] Bank of Montreal, as Agent 115 South LaSalle Street Chicago, Illinois 60603 Attention: Account Management Ladies and Gentlemen: The undersigned, Loewen Group International, Inc., refers to the Credit Agreement, dated as of May 15, 1996 (as amended, the "Credit Agreement", ---------------- the terms defined therein being used herein as therein defined), among the undersigned, The Loewen Group Inc., certain Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for said Lenders (in such capacity as Agent, the "Agent"). The undersigned hereby requests, pursuant to ----- Section 2.18 of the Credit Agreement, that the Facility Termination Date be - ------------ extended from/*/ [May 29, 2001 to May 29, 2002] [May 29, 2002 to May 29, 2003]. - Very truly yours, LOEWEN GROUP INTERNATIONAL, INC. By:______________________________ Name:____________________________ Title:___________________________ ___________________ /*/Include as applicable. - EXHIBIT I FORM OF CONVERSION/CONTINUATION NOTICE [Date] Bank of Montreal, as Agent 115 South LaSalle Street Chicago, Illinois 60603 Attention: Client Services Ladies and Gentlemen: The undersigned, Loewen Group International, Inc., refers to the Credit Agreement, dated as of May 15, 1996 (as amended, the "Credit Agreement", ---------------- the terms defined therein being used herein as therein defined), among the undersigned, The Loewen Group Inc., certain Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for said Lenders (in such capacity as Agent, the "Agent"). The undersigned hereby gives you notice, ----- irrevocably, pursuant to Section 2.7 of the Credit Agreement, that the ----------- undersigned hereby elects to:/*/ - convert a Floating Rate Advance in aggregate principal amount of $________ to a Eurodollar Advance on ________ ,__. The initial Interest Period for such Eurodollar Advance is requested to be ________ month[s][.][; and] convert a Floating Rate Advance in aggregate principal amount of $________ to a Fixed CD Rate Advance on ________ ,__. The initial Interest Period for such Fixed CD Rate Advance is requested to be ________ days[.][; and] convert a Eurodollar Advance in aggregate principal amount of $________ and with a current Interest Period ending ________, __, to a Floating Rate Advance on ________, __[.][; and] convert a Eurodollar Advance in aggregate principal amount of $________ and with a current Interest Period ending ________, __, to a Fixed CD Rate Advance on ________, __. The initial Interest Period for such Fixed CD Rate Advance is requested to be ________ days[.][; and] ____________________ /*/ Include one or more of the following, as applicable. - convert a Fixed CD Rate Advance in aggregate principal amount of $________ and with a current Interest Period ending ________, __, to a Floating Rate Advance on ________________, ___[.][; and] convert a Fixed CD Rate Advance in aggregate principal amount of $________ and with a current Interest Period ending ________, __, to a Eurodollar Advance on _______________, ___. The initial Interest Period for such Eurodollar Advance is requested to be ________________ month[s][.][; and] continue a Eurodollar Advance in aggregate principal amount of $________ and with a current Interest Period ending ________, __, as a Eurodollar Advance. The succeeding Interest Period is requested to be ________ month[s][.][; and] continue a Fixed CD Rate Advance in aggregate principal amount of $_______________ and with a current Interest Period ending ________, __, as a Fixed CD Rate Advance. The succeeding Interest Period is requested to be ________ days. Very truly yours, LOEWEN GROUP INTERNATIONAL, INC. By:_____________________________ Name:___________________________ Title:__________________________ 2 EXHIBIT J FORM OF COLLATERAL TRUST AGREEMENT [INCLUDED UNDER SEPARATE COVER] EXHIBIT K FORM OF APPROVED SALE CERTIFICATE To: The Lenders Party To The Credit Agreement Described Below This Approved Sale Certificate is furnished pursuant to that certain Credit Agreement dated as of May 15, 1996 (as amended, modified, renewed or extended from time to time, the "Agreement") among the Borrower, TLGI, the --------- Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Approved Sale Certificate have the meanings ascribed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _____ of [TLGI] [Borrower]; 2. I have reviewed the terms of the Agreement and I am familiar with the proposed sale of Property described on Schedule I attached hereto (the "Proposed -------- Sale"); - ---- 3. The Proposed Sale is expressly permitted by the terms of the Agreement; and 4. I have no knowledge of the existence of any condition or event which constitutes a Default or Unmatured Default as of the date hereof, and consummation of the Proposed Sale will not give rise to a Default or Unmatured Default. The foregoing certifications are made and delivered this _________ day of __________, __. By:_____________________________ Name:___________________________ Title:__________________________ SAMPLE SCHEDULE I TO APPROVED SALE CERTIFICATE Description of Property and Proposed Sale ----------------------------------------- EXHIBIT L FORM OF SWING LINE LOAN BORROWING NOTICE [Date] Bank of Montreal, as Agent and as Swing Line Lender 115 South LaSalle Street Chicago, Illinois 60603 Attention: Client Services Ladies and Gentlemen: The undersigned, Loewen Group International, Inc., refers to the Credit Agreement, dated as of May 15, 1996 (as amended, the "Credit Agreement", ---------------- the terms defined therein being used herein as therein defined), among the undersigned, The Loewen Group Inc., certain Lenders party thereto and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent for said Lenders (in such capacity as Agent, the "Agent"). The undersigned hereby gives you notice, ----- irrevocably, pursuant to Section 2.23 of the Credit Agreement that the ------------ undersigned hereby requests a Swing Line Loan under the Credit Agreement, and in that connection sets forth below the information relating to such Swing Line Loan (the "Proposed Loan") as required by Section 2.23 of the Credit Agreement: ------------- ------------ (a) The Swing Line Loan Borrowing Date for the Proposed Loan is ____________________. (b) The amount of the Proposed Loan is $________. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Loan: (A) The representations and warranties contained in Article VI of ---------- the Credit Agreement are correct in all material respects, before and after giving effect to the Proposed Loan and to the application of the proceeds therefrom, as though made on and as of such date; and (B) No Default or Unmatured Default has occurred and is continuing or would result from the Proposed Loan or from the application of the proceeds therefrom. Very truly yours, LOEWEN GROUP INTERNATIONAL, INC. By:_____________________________ Name:___________________________ Title:__________________________ 2 EX-4.28 3 COLLATERAL TRUST AGREEMENT EXHIBIT 4.28 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COLLATERAL TRUST AGREEMENT Dated as of May 15, 1996 Among BANKERS TRUST COMPANY, as Trustee, THE LOEWEN GROUP INC., LOEWEN GROUP INTERNATIONAL, INC., and various other Pledgors - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
SECTION DESCRIPTION PAGE ARTICLE I INTERPRETATION .............................. 4 1.1 Defined Terms ................................................. 4 1.2 Quantity and Gender ........................................... 18 1.3 Statute References ............................................ 18 1.4 U.C.C. Definitions ............................................ 18 1.5 Interpretation Not Affected by Headings, etc .................. 18 1.6 Internal References ........................................... 19 ARTICLE II SECURED INDEBTEDNESS ........................ 19 2.1 Secured Indebtedness; Classes; Initial Secured Indebtedness ... 19 2.2 Ranking of Indebtedness ....................................... 20 2.3 Secured Indebtedness Register ................................. 20 2.4 Designation of Additional Secured Indebtedness ................ 21 2.5 Additional Secured Indebtedness Registration .................. 22 2.6 Designation of Class for Additional Secured Indebtedness ...... 23 2.7 No Notice of Trusts or Agency ................................. 23 ARTICLE III SECURITY ................................. 24 3.1 Grant of Senior Lien for Senior Secured Indebtedness .......... 24 3.2 Senior Lien Habendum .......................................... 25 3.3 Grant of Junior Lien for Class D Secured Indebtedness ......... 25 3.4 Delivery of Pledged Property; Registration of Pledge, Transfer, etc ............................................... 25 3.5 Termination ................................................... 26 3.6 Assignments ................................................... 27 3.7 Discharge of Security.......................................... 27 3.8 Additional Pledgors; Joinder Agreements........................ 28 ARTICLE IV POSSESSION, USE AND RELEASE OF COLLATERAL .............................. 28 4.1 Possession Until Enforcement Event ............................ 28 4.2 Disposition of Collateral; Voting Rights; Distributions ....... 29 4.3 Releases when no Enforcement Event ............................ 30 4.4 Other Releases ................................................ 30 4.5 Protection of Purchasers ...................................... 31 4.6 Proceeds Held in Trust ........................................ 31
i 4.7 Application of Moneys Held by Trustee ......................... 31 4.8 Powers and Rights ............................................. 32 4.9 Liability of Trustee and Secured Parties ...................... 32 4.10 Trustee Not Responsible for Value of Collateral ............... 32 ARTICLE V GUARANTY OF SENIOR SECURED INDEBTEDNESS ...................... 32 5.1 Guaranty ...................................................... 32 5.2 Unconditional ................................................. 33 5.3 Discharge; Reinstatement in Certain Circumstances ............. 34 5.4 Waiver ........................................................ 34 5.5 Waiver of Subrogation Rights .................................. 35 5.6 Stay of Acceleration .......................................... 35 5.7 Gross-up ...................................................... 35 5.8 Continuing Obligation: Further Acknowledgements ............... 36 5.9 Subordination of Claims ....................................... 36 ARTICLE VI REPRESENTATIONS AND WARRANTIES ........................ 37 6.1 Ownership, No Liens, etc. ..................................... 37 6.2 Corporate and Governmental Authorization; Contravention ....... 37 -------------- 6.3 Binding Effect ................................................ 38 6.4 Valid Security Interest ....................................... 38 6.5 As to Collateral .............................................. 38 6.6 Authorization, Approval, etc. ................................. 38 6.7 All Shares Pledged ............................................ 39 6.8 Solvency ...................................................... 39 ARTICLE VII COVENANTS OF THE PLEDGORS ......................... 39 7.1 Title to Property ............................................. 39 7.2 Observance and Performance .................................... 39 7.3 Registrations and Deliveries .................................. 40 7.4 After-Acquired Property and Further Assurances ................ 41 7.5 Trustee's Remuneration and Expenses ........................... 43 7.6 Notification of Change of Name ................................ 44 7.7 Companies Undertakings ........................................ 45 7.8 Exceptions to Approvals ....................................... 45 7.9 Consent of Louisiana Department of Insurance .................. 45
ii ARTICLE VIII ENFORCEMENT ............................... 45 8.1 Enforcement Event and Enforcement Order ....................... 45 8.2 Trustee Bound to Enforce ...................................... 46 8.3 Enforcement by the Trustee .................................... 46 8.4 Appointment of Receiver ....................................... 47 8.5 Sale by Trustee ............................................... 49 8.6 Other Judicial Remedies ....................................... 50 8.7 Waiver of Enforcement Order ................................... 50 8.8 Enforcement by Secured Parties ................................ 51 8.9 Senior Secured Party as Purchaser ............................. 52 8.10 Application of Proceeds of Realization of Security ............ 52 8.11 Trustee Appointed Attorney .................................... 54 8.12 Distribution of Proceeds ...................................... 54 8.13 Persons Dealing with the Trustee .............................. 55 8.14 Exercise of Powers by the Trustee ............................. 55 ARTICLE IX SUPPLEMENTS, AMENDMENTS AND SUCCESSOR PLEDGORS ............. 55 9.1 Provision for Supplements for Certain Purposes; Amendments .... 55 9.2 Successor Pledgors ............................................ 57 ARTICLE X SECURED PARTIES' ORDERS, SECURED PARTIES' CLASS RESOLUTIONS AND ENFORCEMENT ORDERS ................... 57 10.1 Powers of Secured Parties ..................................... 57 10.2 Release Order ................................................. 58 10.3 Notice By Trustee ............................................. 59 10.4 Binding Effect of Secured Parties' Class Resolutions, Secured Parties' Orders, Release Orders and Enforcement Orders ........ 59 10.5 Evidence of Rights of Holders ................................. 59 ARTICLE XI ENFORCEMENT COMMITTEE ............................. 60 11.1 Enforcement Committee To Direct Trustee's Actions ............. 60 11.2 Notice of Enforcement Order to Secured Parties ................ 60 11.3 Enforcement Representatives ................................... 61 11.4 Enforcement Committee ......................................... 62 11.5 Appointment of Enforcement Representatives .................... 63 11.6 One Enforcement Committee To Be Constituted at Any Time ....... 65 11.7 Convening and Conduct of Meetings of the Enforcement Committee ..................................................... 65 11.8 Meetings by Telephone ......................................... 67 11.9 Declaration by Chairman of Result of Vote ..................... 67
iii 11.10 Minutes ....................................................... 67 11.11 Binding Effect of Resolutions ................................. 67 11.12 Enforcement Directions ........................................ 68 11.13 Failure of Enforcement Committee to Provide Directions ........ 68 11.14 Notices Under This Article .................................... 69 11.15 Class D Secured Parties ....................................... 69 ARTICLE XII CONCERNING THE TRUSTEE ........................... 69 12.1 Amount of Secured Indebtedness Outstanding .................... 69 12.2 Conditions Precedent to Trustee's Obligation to Act ........... 70 12.3 Evidence ...................................................... 70 12.4 Experts and Advisers .......................................... 71 12.5 Cash, Documents, Etc. Held by the Trustee ..................... 71 12.6 Cash, Documents, Etc. Paid or Delivered to the Trustee ........ 71 12.7 Action by Trustee to Protect Security ......................... 72 12.8 Trustee Not Required to Give Security ......................... 72 12.9 Protection of Trustee and Secured Parties ..................... 72 12.10 Replacement of Trustee ........................................ 73 12.11 Acceptance of Trusts .......................................... 74 12.12 Co-Trustee; Separate Trustees ................................. 74 ARTICLE XIII MISCELLANEOUS .............................. 76 13.1 Notice ........................................................ 76 13.2 Business Day .................................................. 78 13.3 Remedies Subject to Applicable Law ............................ 78 13.4 No Waiver ..................................................... 78 13.5 Applicable Law ................................................ 78 13.6 Counterparts .................................................. 78 13.7 CONSENT TO JURISDICTION ....................................... 79 13.8 WAIVER OF JURY TRIAL .......................................... 80
iv SCHEDULE 1 - INITIAL SECURED INDEBTEDNESS SCHEDULE 2 - LIST OF PLEDGORS AND INITIAL PLEDGED SUBSIDIARY SHARES SCHEDULE 3 - LIST OF EXCLUDED SUBSIDIARIES SCHEDULE 4 - CERTAIN APPROVALS SCHEDULE 5 - NOTICE INFORMATION FOR SECURED PARTY REPRESENTATIVES EXHIBIT A - FORM OF ADDITIONAL SECURED INDEBTEDNESS REGISTRATION STATEMENT EXHIBIT B - FORM OF JOINDER AGREEMENT EXHIBIT C - FORM OF NOTICE OF PLEDGE EXHIBIT D - FORM OF COLLATERAL DELIVERY NOTICE PURSUANT TO SECTION 7.3 OF THE COLLATERAL TRUST AGREEMENT EXHIBIT E - FORM OF CONFIRMATION OF TERMINATION OF PLEDGOR SUBSIDIARY'S OBLIGATIONS PURSUANT TO SECTION 5.3 OF THE COLLATERAL TRUST AGREEMENT v THIS COLLATERAL TRUST AGREEMENT dated as of May 15, 1996 is A M O N G: BANKERS TRUST COMPANY, a New York banking corporation having its head --------------------- office in the City of New York, in the State of New York, and being a banking corporation duly authorized to carry on trust business in the State of New York (hereinafter together with its successors in such capacity called the "Trustee"). ------- - and - THE LOEWEN GROUP INC., a corporation incorporated under the laws of --------------------- British Columbia having its head office in the Municipality of Burnaby, in the Province of British Columbia, Canada (hereinafter together with its successors and permitted assigns called "TLGI"), ---- - and - LOEWEN GROUP INTERNATIONAL, INC., a corporation incorporated under the -------------------------------- laws of Delaware having an office in Covington, Kentucky, U.S.A. (hereinafter together with its successors and permitted assigns called "LGII" and together with TLGI, collectively the "Companies" and ---- --------- individually a "Company"), ------- - and - The various other subsidiaries of TLGI from time to time party hereto as Pledgor Subsidiaries. WHEREAS 1. Concurrently herewith LGII and TLGI are entering into a U.S. $750,000,000 Credit Agreement, dated as of May 15, 1996 (as the same may be modified, amended, supplemented, extended, renewed or restated from time to time, the "1996 Credit Agreement"), with the banks and other financial institutions --------------------- from time to time party thereto (such banks and financial institutions, collectively, the "1996 Lenders"), Goldman, Sachs & Co., as Documentation ------------ Agent, and Bank of Montreal, as L/C Issuer, Swing Line Lender and Agent (in the last such capacity and including any successor in such capacity, the "1996 Agent"), providing for the 1996 Lenders to make loans to LGII and to ----------- issue or participate in swingline loans and letters of credit for the account of LGII and pursuant to which TLGI is guaranteeing the obligations of LGII thereunder. 2. TLGI, LGII and Loewen Management Investment Corporation in its capacity as agent for LGII are parties to the U.S. $121,300,000 1994 MEIP Credit Agreement dated as of June 14, 1994 (as the same has been and may be modified, amended, supplemented, extended, renewed or restated from time to time, the "MEIP Credit Agreement") with the banks from time to time parties --------------------- thereto (the "MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for ---------- such banks (the "MEIP Agent"), pursuant to which such banks have made and ---------- may maintain loans to LGII acting by and through its agent, Loewen Management Investment Corporation, and pursuant to which TLGI has guaranteed the obligations of LGII thereunder. 3. TLGI and LGII are parties to the Operating Credit Agreement dated for reference August 15, 1994 (as the same has been and may be modified, amended, supplemented, extended, renewed, or restated from time to time, the "RBC Credit Agreement") with Royal Bank of Canada (together with its -------------------- assigns under the RBC Credit Agreement, "RBC"), pursuant to which RBC has made loans and may from time to time make loans to TLGI and issue letters of credit, guarantee letters and bankers acceptances for TLGI, and pursuant to which LGII has guaranteed the obligations of TLGI thereunder. 4. TLGI and LGII are parties to the Credit Agreement dated as of January 12, 1995 (as the same has been and may be modified, amended, supplemented, extended, renewed or restated from time to time, the "Dresdner Credit --------------- Agreement") with Dresdner Bank Canada and, by a transfer certificate dated --------- January 12, 1995, with ABN AMRO Bank Canada (together with their assigns under the Dresdner Credit Agreement, the "Dresdner Banks"), pursuant to -------------- which the Dresdner Banks have made a term loan in the original principal amount of Cdn. $35,000,000 to TLGI and pursuant to which LGII has guaranteed the obligations of TLGI thereunder. 5. (a) TLGI and LGII are parties to (i) the separate and several Note Agreements, each dated for reference October 1, 1991, as amended by the First Amendment to Series A, B and C Note Agreement, dated as of June 10, 1994, (ii) the separate and several Note Agreements, each dated for reference September 1, 1993, as amended by the First Amendment to Series D Note Agreement, dated as of June 10, 1994, and (iii) that certain Note Agreement, dated for reference February 1, 1994, as amended by the First Amendment to Series E Note Agreement, dated as of June 10, 1994, (b) TLGI is party to (i) the Guaranty Agreement, dated for reference October 1, 1991, with respect to the Series A and B Note Agreements, and (ii) the Guaranty Agreement, dated for reference February 1, 1994, with respect to the Series E Note Agreement, and (c) LGII is a party to (i) the Guaranty Agreement, dated for reference October 1, 1991, with respect to the Series C Note Agreements and (ii) the Guaranty Agreement, dated for reference April 1, 1993 with respect to the Series D Note Agreements. The Note Agreements described in clause (a) above, as the same have been and may be modified, amended, supplemented, extended, renewed or restated from time to time are herein referred to (A) with respect to the Series A Notes, the "Series A Note ------------- 2 Agreements", (B) with respect to the Series B Notes, the "Series B Note ---------- ------------- Agreements", (C) with respect to the Series C Notes, the "Series C Note ---------- ------------- Agreements", (D) with respect to the Series D Notes, the "Series D Note ---------- ------------- Agreements" and (E) with respect to the Series E Notes, the "Series E Note ---------- ------------- Agreement" and, collectively, the "Series A, B, C, D and E Note --------- ---------------------------- Agreements". ---------- 6. LGII and TLGI are parties to an Indenture, dated as of March 20, 1996, with Fleet National Bank of Connecticut, as trustee, pursuant to which the Series 1 Notes and the Series 2 Notes were issued. 7. Loewen Finance (Wyoming) Limited Liability Company ("LFW"), a Wholly-Owned --- Subsidiary of TLGI, has made loans from time to time to LGII ("LFW Loans"), --------- pursuant to the agreements listed in Schedule 1 under the heading "Class D Secured Indebtedness" (as the same have been and may be modified, amended, supplemented, extended, renewed or restated, the "LFW Loan Agreements") in ------------------- an aggregate principal amount outstanding on May 17, 1996 of U.S. $590,039,660.49, and may make additional LFW Loans from time to time to LGII. 8. Each of TLGI, LGII and the Pledgor Subsidiaries desires to grant certain security, the granting of which is provided for by this Collateral Trust Agreement, to the Trustee for the benefit of the 1996 Agent and the 1996 Lenders, the MEIP Agent and the MEIP Banks, RBC, the Dresdner Banks, the holders of the Series A Notes, the Series B Notes, the Series C Notes, the Series D Notes, the Series E Notes, the Series 1 Notes and the Series 2 Notes and any other party hereafter becoming a Holder of Class A Secured Indebtedness, Class B Secured Indebtedness or Class C Secured Indebtedness, to secure all such Secured Indebtedness. 9. All things necessary have been done and performed to make: (a) the Class A Secured Indebtedness, the Class B Secured Indebtedness and the Class C Secured Indebtedness described on Schedule 1 entitled to ---------- the benefit of the Senior Lien; and (b) additional indebtedness of TLGI, LGII or any other Wholly-Owned Subsidiary when designated by either Company as provided herein as Additional Secured Indebtedness and either as Class A Secured Indebtedness, Class B Secured Indebtedness or Class C Secured Indebtedness, entitled to the benefit of the Senior Lien; with the benefits and subject to the terms of this Collateral Trust Agreement and to make this Collateral Trust Agreement a valid and binding pledge, security agreement and deed of trust for the security of the Senior Secured Indebtedness. 3 10. Each of TLGI, LGII and the Pledgor Subsidiaries desires to grant certain security, the granting of which is provided for by this Collateral Trust Agreement, to the Trustee for the benefit of LFW and any other party hereafter becoming a Holder of Class D Secured Indebtedness, when designated by either Company as provided herein, to secure all such Class D Secured Indebtedness on a basis junior and subordinate to the Senior Secured Indebtedness. 11. All things necessary have been done and performed to make: (a) the Class D Secured Indebtedness described on Schedule 1 entitled to ---------- the benefit of the Junior Lien; and (b) additional indebtedness of TLGI, LGII or any other Wholly-Owned Subsidiary when designated by either Company as provided herein as Additional Secured Indebtedness and Class D Secured Indebtedness, entitled to the benefit of the Junior Lien; with the benefits and subject to the terms of this Collateral Trust Agreement and to make this Collateral Trust Agreement a valid and binding pledge, security agreement and deed of trust for the security of the Class D Secured Indebtedness. 12. The foregoing recitals are made as representations and statements of fact by TLGI, LGII and the Pledgor Subsidiaries and not by the Trustee. NOW THEREFORE, THIS INDENTURE WITNESSETH and it is hereby covenanted and agreed and declared as follows: ARTICLE I INTERPRETATION 1.1 Defined Terms ------------- In this Collateral Trust Agreement (including without limitation the recitals hereto), unless the context otherwise specifies or requires, or unless otherwise defined herein or therein: (1) "Additional Secured Indebtedness" is defined in subsection 2.4(1). ------------------------------- ----------------- (2) "Additional Secured Indebtedness Registration Statement" means an instrument designating indebtedness as Additional Secured Indebtedness and specifying the Class of such Additional Secured Indebtedness, executed by the related Secured Party Representative and the Companies, substantially in the form of Exhibit A. --------- 4 (3) "Additional Secured Parties" means the Secured Parties other than the -------------------------- initial Secured Parties, and "Additional Secured Party" means any of them. ------------------------ (4) "After-Acquired Property" is defined in subsection 7.4(1). ----------------------- ----------------- (5) "Applicable Law" with respect to any Person or matter means any law, rule, -------------- regulation, order, decree or other requirement having the force of law relating to such Person or matter and, where applicable, any interpretation thereof by any Person having jurisdiction with respect thereto or charged with the administration or interpretation thereof. (6) "Appointing Groups" is defined in Section 11.5(3). ----------------- --------------- (7) "Appointment Request" is defined in subsection 11.2(3). ------------------- ------------------ (8) "Approval" means each and every approval, authorization, consent, -------- withholding of objection, filing and registration by or with any Governmental Body necessary to authorize or permit the execution, delivery or performance by any Person of this Collateral Trust Agreement or any Financing Agreement or for the validity or enforceability against any Person hereof or thereof. (9) "Base Rate" means, at any time, the floating rate per annum then most --------- recently announced by Bank of Montreal in Chicago, Illinois as the reference rate of interest it will use to determine rates of interest for loans in U.S. Dollars in the United States and referred to by it as its "U.S. base rate". (10) "Business" means the pre-need selling of funeral, cemetery and cremation -------- services, the provision of funeral services and insurance, and the operation of funeral homes, cemeteries, crematoria, flower shops and ambulance services by TLGI and the Subsidiaries, and the operation and conduct of any related business of a similar nature, taken as a whole. (11) "Business Day" means a day, excluding Saturday and Sunday, on which banking ------------ institutions are open for business in both of: (a) Vancouver, British Columbia, Canada; and (b) New York, New York, U.S.A. (12) "Canadian Dollars" or "Cdn. $" means lawful money of Canada. ---------------- ------ (13) "Canadian Subsidiaries" means the Subsidiaries in existence as of April 19, --------------------- 1996 which are shown as Canadian Subsidiaries on Schedule 2 and any other ---------- Subsidiary, 5 from time to time organized, incorporated or carrying on business in Canada, other than the Excluded Subsidiaries, and "Canadian Subsidiaries" --------------------- means any of them. (14) "Class" of Secured Indebtedness means any of the Class A Secured ----- Indebtedness, the Class B Secured Indebtedness, the Class C Secured Indebtedness or the Class D Secured Indebtedness. (15) "Class A Secured Indebtedness" means all Obligations in respect of the ---------------------------- indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class A Secured Indebtedness" on Schedule 1 and (if any) ---------- the Additional Secured Indebtedness designated as Class A Secured Indebtedness pursuant to Section 2.6. ----------- (16) "Class A Secured Parties" means the 1996 Agent, the 1996 Lenders, the MEIP ----------------------- Agent, the MEIP Banks, RBC, and the Dresdner Banks, and each Holder of Additional Secured Indebtedness (if any), which Additional Secured Indebtedness is designated as Class A Secured Indebtedness pursuant to Section 2.6, and their Secured Party Representatives, and "Class A Secured ----------- --------------- Party" means any of them. ----- (17) "Class A Secured Parties' Resolution" means any resolution, direction or ----------------------------------- instrument authorized, executed and delivered by the Secured Party Representatives representing at least 66-2/3% of the aggregate amount of the Class A Secured Indebtedness then Outstanding, which resolution, direction or instrument may be evidenced by the delivery of one or more counterparts of a written instrument or by the delivery of the same by facsimile transmission. (18) "Class B Secured Indebtedness" means all Obligations in respect of the ---------------------------- indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class B Secured Indebtedness" on Schedule 1 and (if any) ---------- the Additional Secured Indebtedness designated as Class B Secured Indebtedness pursuant to Section 2.6. ----------- (19) "Class B Secured Parties" means the Holders of the Series A, B, C, D and E ----------------------- Notes, and each Holder of Additional Secured Indebtedness (if any), which Additional Secured Indebtedness is designated as Class B Secured Indebtedness pursuant to Section 2.6, and their Secured Party ----------- Representatives, and "Class B Secured Party" means any of them. --------------------- (20) "Class B Secured Parties' Resolution" means any resolution, direction or ----------------------------------- instrument authorized, executed and delivered by the Secured Party Representatives representing at least 66-2/3% of the aggregate principal amount of the Class B Secured Indebtedness then Outstanding, which resolution, direction or instrument may be evidenced by the delivery of one or more counterparts of a written instrument or by the delivery of the same by facsimile transmission. 6 (21) "Class C Secured Indebtedness" means all Obligations in respect of the ---------------------------- indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class C Secured Indebtedness" on Schedule 1 and (if any) ---------- the Additional Secured Indebtedness designated as Class C Secured Indebtedness pursuant to Section 2.6. ----------- (22) "Class C Secured Parties" means the Holders of the Series 1 Notes and the ----------------------- Series 2 Notes, and each Holder of Additional Secured Indebtedness (if any), which Additional Secured Indebtedness is designated as Class C Secured Indebtedness pursuant to Section 2.6, and their Secured Party ----------- Representatives, and "Class C Secured Party" means any of them. --------------------- (23) "Class C Secured Parties' Resolution" means any resolution, direction or ----------------------------------- instrument authorized, executed and delivered by the Secured Party Representatives representing at least 66-2/3% of the aggregate principal amount of the Class C Secured Indebtedness then Outstanding, which resolution, direction or instrument may be evidenced by the delivery of one or more counterparts of a written instrument or by the delivery of the same by facsimile transmission. (24) "Class D Secured Indebtedness" means the LFW Loans, any other indebtedness ---------------------------- of TLGI, LGII or any other Wholly-Owned Subsidiary owing to a Finance Subsidiary and designated as Additional Secured Indebtedness pursuant to Article II and any other Additional Secured Indebtedness designated as ---------- Class D Secured Indebtedness pursuant to Section 2.6. ----------- (25) "Class D Secured Parties" means LFW and each other Holder of Additional ----------------------- Secured Indebtedness (if any), which Additional Secured Indebtedness is designated as Class D Secured Indebtedness pursuant to Section 2.6, and ----------- their Secured Party Representatives, and "Class D Secured Party" means any --------------------- of them. (26) "Class D Secured Parties' Resolution" means any resolution, direction or ----------------------------------- instrument authorized, executed and delivered by the Secured Party Representatives representing at least 66-2/3% of the aggregate principal amount of the Class D Secured Indebtedness then Outstanding, which resolution, direction or instrument may be evidenced by the delivery of one or more counterparts of a written instrument or by the delivery of the same by facsimile transmission. (27) "Closing Date" means the date on which the Trustee receives an Officers' ------------ Certificate of LGII to the effect that the initial advances have been or are being made to LGII by the 1996 Lenders under the 1996 Credit Agreement. (28) "Collateral" is defined in Section 3.1. ---------- ----------- 7 (29) "Collateral Delivery Notice" means a notice from a Pledgor to the Trustee, -------------------------- substantially in the form of Exhibit D. --------- (30) "Collateral Documents" means this Collateral Trust Agreement and each -------------------- Joinder Agreement, and "Collateral Document" means any of them. ------------------- (31) "Collateral Trust Agreement", "hereto", "herein", "hereof", "hereby", -------------------------- "hereunder" and similar expressions refer to this agreement, as it may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of this agreement, and not to any particular Article, Section, subsection or other portion thereof, and include any and every amendment hereto and each Joinder Agreement and the expressions "Article", "Section", "subsection", "paragraph" and "clause" followed by a number mean and refer to the specified article, section, subsection, paragraph or clause of this Collateral Trust Agreement. (32) "Companies" and "Company" are defined in the preamble. --------- ------- -------- (33) "Company Order" means an order signed by any two officers of a Company, one ------------- of whom is the President, an Executive Vice-President, a Senior Vice- President, the Vice-President, Finance or the Vice-President, Law and Corporate Secretary of such Company, each in that capacity and not personally. (34) "Contractual Obligation" means, relative to any Person, any provision of ---------------------- any security issued by such Person or of any instrument, indenture, agreement or undertaking to which such Person is a party or by which it or any of its property is bound. (35) "Counsel" means (A) Thelen, Marrin, Johnson & Bridges or such further or ------- other firm as may be selected by TLGI and reasonably satisfactory to the Trustee, or (B) if an Enforcement Order is in effect, such law firm or law firms as may be selected by the Trustee. (36) "Default" means any condition or event which constitutes an "event of ------- default" or other like event howsoever named under any Financing Agreement or which with the giving of notice or lapse of time or both would, unless cured or waived as permitted or provided by the applicable Financing Agreement, become an "event of default" or other like event howsoever named under any Financing Agreement. (37) "Directors" means the board of directors of any Pledgor, or, whenever duly --------- empowered, the executive committee, if any, of the board of directors of such Pledgor for the time being, and any reference without more to action by the directors or by the board of directors shall mean action by the directors as a board or by the executive committee as such. 8 (38) "Distributions" means all cash dividends, stock dividends, liquidating ------------- dividends, shares of stock resulting from stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, cash distributions and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Pledged Shares or other shares of capital stock constituting Collateral. (39) "Dresdner Banks" is defined in the recitals. -------------- -------- (40) "Dresdner Credit Agreement" is defined in the recitals. ------------------------- -------- (41) "Enforcement Committee" is defined in Section 11.1. --------------------- ------------ (42) "Enforcement Direction" is defined in subsection 11.12(l). --------------------- ------------------- (43) "Enforcement Event" is defined in Section 8.1. ----------------- ----------- (44) "Enforcement Notice Date" is defined in subsection 11.2(l). ----------------------- ------------------ (45) "Enforcement Order" is defined in Section 8.1. ----------------- ----------- (46) "Enforcement Representative" means an individual at any time appointed to -------------------------- the Enforcement Committee in accordance with Article XI, or an alternate ---------- appointed therefor in accordance with subsection 11.3(4), and "Enforcement ------------------ ----------- Representatives" means more than one Enforcement Representative. --------------- (47) "Excluded Subsidiaries" means the Subsidiaries listed in Schedule 3, and --------------------- ---------- "Excluded Subsidiary" means any of them. -------------------- (48) "Finance Subsidiary" means any captive finance Subsidiary of TLGI that (i) ------------------ buys accounts receivable or other financial assets of any one or more other Subsidiaries of TLGI, or (ii) makes loans or otherwise extends credit to any one or more other Subsidiaries of TLGI. (49) "Financing Agreements" means the Note Agreements, the 1996 Credit -------------------- Agreement, the MEIP Credit Agreement, the RBC Credit Agreement and the Dresdner Credit Agreement, the LFW Loan Agreements, and any and all other agreements which by the provisions of any Additional Secured Indebtedness Registration Statement are incorporated in the definition of "Financing Agreements", and "Financing Agreement" means any of them. ------------------- (50) "Governmental Body" means, as the context requires, any government, ----------------- parliament, legislature, regulatory authority or body, agency, tribunal, department, commission, board or court or other law, regulation or rule making entity (including a Minister of 9 the Crown or duly appointed and authorized federal, provincial or state representative) having or purporting to have jurisdiction on behalf of Canada, the United States of America, or any state, province, municipality, region, district, or other subdivision thereof or other lawful authority therein or thereof. (51) "Group" means TLGI and the Subsidiaries. ----- (52) "Holder" means any Person who holds Secured Indebtedness and any successor ------ to or assignee from such a holder of such Secured Indebtedness; provided -------- that in the case of any Holder of Additional Secured Indebtedness, its Secured Party Representative shall have become a Secured Party Representative hereunder pursuant to Section 2.5. ----------- (53) "Initial Pledged Subsidiary Shares" means, collectively, that number or --------------------------------- amount of the issued and outstanding shares of capital stock, partnership interests, limited liability company membership interests or other equity interests of each Pledged Share Issuer identified on Schedule 2 hereto and ---------- (except as otherwise permitted by Section 3.4) delivered by the respective Pledgor identified opposite such shares or other equity interests to the Trustee hereunder. (54) "Joinder Agreement" is defined in Section 3.8. ----------------- ----------- (55) "Junior Lien" means each and every Lien in favor of the Trustee to secure ----------- the Class D Secured Indebtedness constituted hereby or pursuant hereto or intended so to be constituted and each and every Lien in favor of the Trustee to secure the Class D Secured Indebtedness constituted from time to time by any and all supplements hereto in any manner whatsoever created. (56) "LFW" is defined in the recitals. --- -------- (57) "LFW Loans" is defined in the recitals. --------- -------- (58) "LFW Loan Agreements" is defined in the recitals. ------------------- -------- (59) "LGII Receivables" is defined in Section 3.1. ---------------- ----------- (60) "LGII Series C Note Guarantee" is defined in Schedule 1. ---------------------------- ---------- (61) "LGII Series D Note Guarantee" is defined in Schedule 1. ---------------------------- ---------- (62) "Lien" means a lien, charge, pledge, assignment, security interest or other ---- encumbrance, whether fixed or floating, on any property, whether real, personal or mixed, tangible or intangible, or a pledge or hypothecation thereof. 10 (63) "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- business, property, financial condition, results of operations, or prospects of TLGI and the Subsidiaries taken as a whole, (b) the ability of the Pledgors to perform their respective obligations under the Collateral Documents, or (c) the validity or enforceability of any of the Collateral Documents or the rights or remedies of the Trustee or the Secured Parties thereunder. (64) "MEIP Agent" is defined in the recitals. ---------- -------- (65) "MEIP Banks" is defined in the recitals. ---------- -------- (66) "MEIP Credit Agreement" is defined in the recitals. --------------------- -------- (67) "1996 Agent" is defined in the recitals. ---------- -------- (68) "1996 Credit Agreement" is defined in the recitals. --------------------- -------- (69) "1996 Lenders" is defined in the recitals. ------------ -------- (70) "1996 Public Notes Trustee" is defined in Schedule 1. ------------------------- ---------- (71) "Non-Pledgor" is defined in Section 3.8. ----------- ----------- (72) "Note Agreements" means the Series A, B, C, D and E Note Agreements and the --------------- note agreements, guarantees and indenture described under the headings "Class B Secured Indebtedness" and "Class C Secured Indebtedness" in Schedule 1, as ---------- modified, amended, supplemented, extended, renewed or restated from time to time. (73) "Notes" means the Series A Notes, the Series B Notes, the Series C Notes, ----- the Series D Notes, the Series E Notes, the Series 1 Notes and the Series 2 Notes, and "Note" means any of them. ---- (74) "Obligations" means all present and future indebtedness and other ----------- liabilities and obligations, direct or indirect, absolute or contingent, matured or unmatured, at any time due or to become due, of any of the Obligors to any Secured Party, including without limitation all principal and premium (if any) and interest thereon, interest on overdue interest, all fees and interest thereon, all liabilities under Swap Contracts, and all costs, expenses and charges, or any part thereof. (75) "Obligors" means the Companies and the Wholly-Owned Subsidiaries that are -------- the borrowers, guarantors or otherwise obligors in respect of the Secured Indebtedness, and "Obligor" means any of them. ------- 11 (76) "Officers' Certificate" means a certificate signed by any two officers of a --------------------- Company, one of whom is the President, an Executive Vice-President, a Senior Vice-President, the Vice-President, Finance, or the Vice-President, Law and Corporate Secretary of such Company, each in that capacity and not personally. (77) "Other Debt" is defined in Section 5.9. ---------- ----------- (78) "Other Obligor" is defined in Section 5.9. ------------- ----------- (79) "Outstanding" means, in respect of any Secured Indebtedness at any time, ----------- the sum of (A) the unpaid principal amount thereof including, without limitation, Swap Outstandings constituting Secured Indebtedness, the undrawn amounts of all outstanding letters of credit and bank guarantees the obligation to reimburse the issuer for which would constitute Secured Indebtedness, and the face amount of any outstanding bankers acceptances, provided, that if any Secured Indebtedness is guaranteed by one or more -------- guarantees which constitute Secured Indebtedness or by the guarantee set forth in Section 5.1, the Outstanding amount of such Secured Indebtedness ----------- will be calculated without double counting for such guarantees, plus (B) ---- except (1) in respect of any vote regarding an Enforcement Event or Enforcement Order or any computation when an Enforcement Event, Enforcement Direction, or Enforcement Order is in effect and (2) after the occurrence and during the continuance of an Enforcement Event, and without duplication, all unused and unexpired or unterminated commitments to extend credit under the related Financing Agreement. (80) "Permitted Encumbrances" means as of any particular time the Liens in ---------------------- favor of the Trustee granted hereunder and such Liens on the Collateral as are permitted by all of the Financing Agreements or authorized by any Secured Parties' Order(s), provided that any Lien otherwise not permitted -------- by a Financing Agreement pursuant to restrictions contained therein shall upon waiver of such restrictions in accordance with such Financing Agreement be deemed to be permitted thereunder for purposes of this Collateral Trust Agreement. (81) "Person" means an individual, company, corporation, partnership, limited ------ liability company, trust, joint venture, co-ownership, unincorporated organization, body corporate, personal representative, co-operative association or Governmental Body, and pronouns have a similarly extended meaning. (82) "Pledged Property" means all Pledged Shares and all other securities and ---------------- other instruments which (except as otherwise permitted by Section 3.4) are delivered by any Pledgor to the Trustee under this Collateral Trust Agreement or may from time to time hereafter (except as otherwise permitted by Section 3.4) be delivered by such Pledgor to the Trustee or its designee for the purpose of pledge under this Collateral Trust Agreement. 12 (83) "Pledged Share Issuer" means each Person identified in Schedule 2 hereto as -------------------- ---------- the issuer of Pledged Shares identified opposite the name of such Person, as such Schedule 2 may be amended, supplemented or otherwise modified from ---------- time to time in accordance with Article VII. ----------- (84) "Pledged Shares" means, with respect to any Pledgor, those of the Initial -------------- Pledged Subsidiary Shares pledged by it hereunder, and all other shares of capital stock, partnership interests, limited liability company membership interests or other equity interests issued from time to time to such Pledgor by any Canadian Subsidiary or U.S. Subsidiary (that, in each case, is not an Excluded Subsidiary). (85) "Pledgor Subsidiaries" means the Subsidiaries in existence as of April 19, -------------------- 1996 which are shown as Pledgor Subsidiaries on Schedule 2 and any other ---------- Subsidiary which now or hereafter owns directly the capital stock of or a partnership interest in or a limited liability company membership interest in or other equity interest in any Canadian Subsidiary or U.S. Subsidiary (which Canadian Subsidiary or U.S. Subsidiary is not an Excluded Subsidiary), or any Share Option Rights and "Pledgor Subsidiary" means any ------------------ of them, provided, that references to Pledgor Subsidiary shall not include -------- LGII. (86) "Pledgors" means TLGI, LGII and each of the Pledgor Subsidiaries, and -------- "Pledgor"means any of them. ------- (87) "RBC" is defined in the recitals. --- -------- (88) "RBC Credit Agreement" is defined in the recitals. -------------------- -------- (89) "Receiver" or "receiver" means a receiver, a receiver and manager or a -------- -------- receiver-manager. (90) "Receiver's Certificates" is defined in subsection 8.4(9). ----------------------- ----------------- (91) "Related LGII Contracts" is defined in Section 3.1. ---------------------- ----------- (92) "Release Order" means a Class A Secured Parties' Resolution delivered to ------------- the Trustee, requesting the Trustee to release, in accordance with and pursuant to the terms of Sections 3.5, 4.4 or 10.2, the whole of the ------------ --- ---- Collateral. (93) "Relevant Tax" is defined in Section 5.7. ------------ ----------- (94) "Required Class D Secured Parties Consent" means, in the event (A) any ---------------------------------------- item of Collateral is to be released pursuant to any Enforcement Direction following the payment in full of all Senior Secured Indebtedness, and (B) immediately following such release TLGI or any Subsidiary thereof will continue to own all legal and 13 beneficial interests in such item of Collateral, a consent to such release by the Secured Party Representative for each Holder of Class D Secured Indebtedness which Holder is a Wholly-Owned Subsidiary at the time of such release and which holds such Class D Secured Indebtedness free and clear of any Lien or other adverse claim at such time. (95) "Secured Indebtedness" means: -------------------- (a) the Class A Secured Indebtedness; (b) the Class B Secured Indebtedness; (c) the Class C Secured Indebtedness; and (d) the Class D Secured Indebtedness. (96) "Secured Indebtedness Register" is defined in Section 2.3. ----------------------------- ----------- (97) "Secured Parties" means the Trustee, the 1996 Lenders, the 1996 Agent, the --------------- the MEIP Banks, the MEIP Agent, RBC, the Dresdner Banks, the Holders of the Notes, LFW and all other Holders of and Secured Party Representatives for Secured Indebtedness, and "Secured Party" means any of them. ------------- (98) "Secured Parties' Class Resolution" means a Class A Secured Parties' --------------------------------- Resolution, a Class B Secured Parties' Resolution, a Class C Secured Parties' Resolution or a Class D Secured Parties' Resolution, as the case may be. (99) "Secured Parties' Order" means (a) prior to the Senior Secured Indebtedness ---------------------- Termination, a Class A Secured Parties' Resolution together with a Class B Secured Parties' Resolution, and (b) after the Senior Secured Indebtedness Termination, a Class D Secured Parties' Resolution. (100)"Secured Party Representative" means any of the 1996 Agent, the MEIP Agent, ---------------------------- RBC, the Dresdner Banks, the 1996 Public Notes Trustee, LFW and any other agent, trustee or like representative of any Holder(s) which is designated a Secured Party Representative for such Holder(s) in Schedule 1 or, in the ---------- case of the Holders of the Series A, B, C, D and E Notes, in Schedule 5, or ---------- the related Additional Secured Indebtedness Registration Statement, and any successors of any of the foregoing in such capacity. If no Person is designated as a Secured Party Representative for any Secured Indebtedness in Schedule 1 or Schedule 5, as the case may be, or any Additional Secured ---------- ---------- Indebtedness Registration Statement, each Holder of such Secured Indebtedness shall be the Secured Party Representative for itself. If one or more of the Holders of any Secured Indebtedness, in each case acting as Secured Party Representative for itself, designate in writing to the Trustee a Person to be the Secured 14 Party Representative of such Holder(s) and such designation is delivered in writing to the Trustee by such Person, such Person shall be the Secured Party Representative for such designating Holder(s) until such designation is revoked by such designating Holder(s). (101)"Senior Lien" means each and every Lien in favor of the Trustee to secure ----------- amounts owing to the Trustee, the Secured Party Representatives or the Enforcement Representatives hereunder or to secure the Senior Secured Indebtedness constituted hereby or pursuant hereto or intended so to be constituted and each and every Lien in favor of the Trustee to secure the Senior Secured Indebtedness constituted from time to time by any and all supplements hereto in any manner whatsoever created. (102)"Senior Secured Indebtedness" means the Class A Secured Indebtedness, the --------------------------- Class B Secured Indebtedness and the Class C Secured Indebtedness. (103)"Senior Secured Indebtedness Termination" means the final and indefeasible --------------------------------------- payment in full in cash of all Senior Secured Indebtedness, the expiration or termination of all commitments of Senior Secured Parties to extend credit to Obligors under the Financing Agreements, and the termination of all related Financing Agreements, of which the Trustee shall have received written notice from each of the Secured Party Representatives in respect of the Senior Secured Indebtedness. (104)"Senior Secured Parties" means the Class A Secured Parties, the Class B ---------------------- Secured Parties and the Class C Secured Parties, and "Senior Secured -------------- Party" means any of them. ----- (105)"Series A Notes" is defined in Schedule 1. -------------- ---------- (106)"Series A, B, C, D and E Notes" means the Series A Notes, the Series B ----------------------------- Notes, the Series C Notes, the Series D Notes and the Series E Notes, collectively. (107)"Series A, B, C, D and E Note Agreements" is defined in the recitals. --------------------------------------- -------- (108)"Series B Notes" is defined in Schedule 1. -------------- ---------- (109)"Series C Notes" is defined in Schedule 1. -------------- ---------- (110)"Series D Notes" is defined in Schedule 1. -------------- ---------- (111)"Series E Notes" is defined in Schedule 1. -------------- ---------- (112)"Series 1 Notes" is defined in Schedule 1. -------------- ---------- 15 (113)"Series 2 Notes" is defined in Schedule 1. -------------- ---------- (114)"Share Option Agreement" means any written or other arrangements entered ---------------------- into by TLGI, LGII or another Subsidiary pursuant to which TLGI, LGII or such Subsidiary, as the case may be, is granted (1) an option to purchase, directly or through a nominee, (2) a right to require the transfer to TLGI, to LGII or to such Subsidiary, as the case may be, or to their respective nominee, and/or (3) a security interest in, the shares owned by a Person other than TLGI, LGII or another Subsidiary, in a U.S. Subsidiary or a Canadian Subsidiary that (in each case) is not an Excluded Subsidiary; and "Share Option Agreements" means all of them. ----------------------- (115)"Share Option Rights" means any and all rights of TLGI, LGII or another ------------------- Subsidiary under any Share Option Agreement. (116)"Spot Rate" for a currency means the rate quoted by Bankers Trust Company --------- as the spot rate for the purchase by Bankers Trust Company of such currency with another currency through its foreign exchange trading office at approximately 10:00 a.m. (New York City time) on the date two Business Days prior to the date as of which the foreign exchange computation is made. (117)"Statement of Senior Secured Indebtedness" is defined in Section 12.l. ---------------------------------------- ------------ (118)"Subsidiary" of a Person means (a) any corporation more than 50% of the ---------- outstanding securities having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding securities of which, shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, association, limited liability company, joint venture, business trust or similar business organization more than 50% of the ownership interests having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding ownership interests of which, shall at the time be so owned or controlled, or (c) any corporation, partnership, association, limited liability company, joint venture, business trust or similar business organization which under applicable accounting principles is consolidated with such Person. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of TLGI, but in any event "Subsidiary" in respect of TLGI shall not include any entity which otherwise would be a "Subsidiary" if it (i) never carried on business or has ceased to carry on business, and (ii) has assets of less than U.S. $50,000 and together with other such excluded entities does not have assets in excess of U.S. $1,000,000. (119)"Successor Pledgor" is defined in Section 9.2. ----------------- ----------- 16 (120)"Swap Contract" means any agreement (including, without limitation, any ------------- master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, foreign exchange agreement, cross-currency, rate swap agreement, swaption, currency option or any other, similar agreement (including, without limitation, any option to enter into any of the foregoing). (121)"Swap Outstandings" means the net termination payments owing to any Secured ----------------- Party by an Obligor under any Swap Contract which has been terminated at the time Swap Outstandings is calculated. (122)"Taxing Jurisdiction" is defined in Section 5.7. ------------------- ----------- (123)"Temporary Cash Investments" means any investment in (i) securities issued -------------------------- or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than 270 days from the date of acquisition by the Trustee, (ii) time deposits and certificates of deposit of any commercial bank of recognized standing having capital and surplus in excess of U.S. $500,000,000 with maturities of not more than 270 days from the date of acquisition by the Trustee, (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications ---------- specified in clause (ii) above, (iv) commercial paper issued by the parent ----------- corporation of any bank meeting the qualifications specified in clause (ii) above and commercial paper issued by any Person rated at least ----------- A-1 (or the then equivalent thereof) by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or at least P-1 (or the then equivalent thereof) by Moody's Investors Service, Inc. at the time of acquisition and in each case maturing not more than 270 days after the date of acquisition by the Trustee and (v) money market funds (managed by a reputable nationally recognized funds manager) substantially all of whose assets are comprised of securities of the types described in clauses (i) ----------- through (iv) above. ---- (123)"TLGI Series A and B Note Guarantee" is defined in Schedule 1. ---------------------------------- ---------- (125)"TLGI Series E Note Guarantee" is defined in Schedule 1. ---------------------------- ---------- (126)"Trustee" is defined in the preamble. ------- -------- (127)"U.C.C." means the Uniform Commercial Code as in effect in the State of New ------ York. 17 (128)"U.S. Dollars" or "U.S. $" means legal tender of the United States of ------------ ------ America. References to "Dollars" or "$" shall mean U.S. Dollars unless otherwise specified. (129)"U.S. Dollar Equivalent" means, at any time, (a) as to any amount ---------------------- denominated in U.S. Dollars, the amount thereof at such time, and (b) as to any amount denominated in other currency, the equivalent amount in U.S. Dollars as determined by the Trustee at such time on the basis of the Spot Rate for the purchase of U.S. Dollars with such other currency on such date as is specified herein. (130)"U.S. Subsidiaries" means the Subsidiaries in existence as of April 19, ----------------- 1996 which are shown as U.S. Subsidiaries on Schedule 2 and any other ---------- Subsidiary, from time to time organized, incorporated or carrying on business in the United States of America, other than the Excluded Subsidiaries, and "U.S. Subsidiary" means any of them. --------------- (131)"Wholly-Owned" means in relation to a Subsidiary (a) which is a ------------ corporation, that all of the outstanding voting securities thereof are at the time owned or controlled, directly or indirectly, by TLGI, by one or more Wholly-Owned Subsidiaries, or by TLGI and one or more Wholly-Owned Subsidiaries, or (b) which is a partnership, association, limited liability company, joint venture, business trust or similar business organization, that 100% of the ownership interests thereof having ordinary voting power are at the time so owned or controlled. 1.2 Quantity and Gender ------------------- Grammatical variations of any term defined herein shall have similar meanings. Words importing the singular number shall include the plural and vice- versa; and words importing the masculine gender shall include the feminine and neuter genders and vice-versa. 1.3 Statute References ------------------ Except where otherwise provided herein, reference to any statute shall be deemed to be a reference to such statute as amended or re-enacted from time to time. 1.4 U.C.C. Definitions ------------------ Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Collateral Trust Agreement, including its preamble and recitals, with such meanings. 1.5 Interpretation Not Affected by Headings, etc. --------------------------------------------- The division of this Collateral Trust Agreement into Articles, Sections, subsections, paragraphs and clauses, the provision of a table of contents and the insertion of headings are 18 for convenience of reference only and shall not affect the construction or interpretation of this Collateral Trust Agreement. 1.6 Internal References ------------------- A reference within any Section, subsection, paragraph, clause or other division hereof to any subdivision is a reference to such subdivision of the division in which it occurs. ARTICLE II SECURED INDEBTEDNESS 2.1 Secured Indebtedness; Classes; Initial Secured Indebtedness ----------------------------------------------------------- The aggregate principal amount of indebtedness which may be secured under this Collateral Trust Agreement at any time is unlimited, but indebtedness shall be Secured Indebtedness only upon and subject to the conditions set forth in this Article. Any Secured Indebtedness shall be classified as one of the following in accordance with the provisions of this Article: Class A Secured Indebtedness, Class B Secured Indebtedness, Class C Secured Indebtedness or Class D Secured Indebtedness. The Class A Secured Indebtedness, the Class B Secured Indebtedness and the Class C Secured Indebtedness shall be the Senior Secured Indebtedness, having the benefit of the Senior Lien as provided herein. The Class D Secured Indebtedness shall have the benefit of the Junior Lien as provided herein. On the Closing Date, this Collateral Trust Agreement shall become effective and the initial Secured Indebtedness secured under this Collateral Trust Agreement shall be the Obligations in respect of the indebtedness arising under or evidenced by the Financing Agreements listed on Schedule 1. The initial ---------- Class A Secured Indebtedness secured under this Collateral Trust Agreement shall be the Obligations in respect of the indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class A Secured Indebtedness" on Schedule 1. The initial Class B Secured Indebtedness secured under this ---------- Collateral Trust Agreement shall be the Obligations in respect of the indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class B Secured Indebtedness" on Schedule 1. The initial Class C ---------- Secured Indebtedness secured under this Collateral Trust Agreement shall be the Obligations in respect of the indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class C Secured Indebtedness" on Schedule 1. The initial Class D Secured Indebtedness secured under this - ---------- Collateral Trust Agreement shall be the Obligations in respect of the indebtedness arising under or evidenced by the Financing Agreements listed under the heading "Class D Secured Indebtedness" on Schedule 1. ---------- 19 2.2 Ranking of Indebtedness ----------------------- All Senior Secured Indebtedness shall rank pari passu and shall be secured ---- ----- hereby equally and ratably whatever may be the date or terms of issue of the instruments evidencing such Senior Secured Indebtedness or the dates on which such Senior Secured Indebtedness became secured hereby, and in all events all Senior Secured Indebtedness shall rank prior to all Class D Secured Indebtedness. 2.3 Secured Indebtedness Register ----------------------------- The Trustee shall cause to be kept a register (the "Secured Indebtedness -------------------- Register") in which shall be entered the name, address, telephone number, - -------- facsimile number, if any, and representative capacity, if any, of each Secured Party Representative together with the original principal amount of the related Secured Indebtedness, if any, and the commitment amount, if any, under the related Financing Agreement(s), and the name(s) or office(s) of the persons responsible for giving instructions under this Collateral Trust Agreement. The information for the Secured Indebtedness Register for the initial Secured Indebtedness on the Closing Date is set forth in Schedule 1 and Schedule 5. The ---------- ---------- Trustee shall note in the Secured Indebtedness Register any changes, additions and deletions to any of the information relating to any Secured Indebtedness (including, without limitation, any change in Secured Party Representative), upon the Trustee's receiving written notice thereof from the related registered Secured Party Representative or, unless an Enforcement Event has occurred and is continuing, upon the Trustee's receiving an Officers' Certificate of either Company providing notice thereof provided, that no Secured Indebtedness may be -------- deleted from the Secured Indebtedness Register without written notice to the Trustee from the Secured Party Representative for such Secured Indebtedness approving such deletion. The entries in the Secured Indebtedness Register shall be conclusive and binding for all purposes, absent manifest error, and the Trustee and each other Secured Party may treat each Person whose name is recorded in the Secured Indebtedness Register as a Secured Party Representative hereunder for the related registered Secured Indebtedness for all purposes under this Collateral Trust Agreement. The Secured Indebtedness Register shall be available for inspection at the Trustee's office in New York City by any Secured Party Representative during the Trustee's normal business hours and with reasonable prior written notice. The Trustee may conclusively rely on the accuracy of the information certified to it by each Secured Party Representative and shall have no duty whatsoever to independently confirm its accuracy. Notwithstanding anything to the contrary set forth herein, the Trustee shall have no duty to maintain a register of Holders of any registered Secured Indebtedness (other than its maintenance of the Secured Indebtedness Register as provided herein), to monitor transfers of any registered Secured Indebtedness, or in any manner to monitor compliance with any U.S. Federal or state securities laws or the securities laws of any other jurisdiction. 20 2.4 Designation of Additional Secured Indebtedness ---------------------------------------------- (1) Subject to subsection (2) hereunder, either Company may from time to time -------------- by resolutions of its Directors designate any of the following to be Secured Indebtedness hereunder ("Additional Secured Indebtedness") entitled to the ------------------------------- security hereby created: (i) new indebtedness for borrowed money, obligations in respect of letters of credit, bank guarantees or bankers acceptances, and obligations in respect of Swap Contracts, incurred by either Company or any Wholly- Owned Subsidiary, which in the case of indebtedness described in this paragraph (i) is not secured except pursuant to this Collateral Trust Agreement, including, without limitation, all principal, interest and premiums thereon, interest on overdue interest, all fees and interest thereon, early termination payment obligations, and all costs, expenses and charges, or any part thereof; (ii) guarantees by either Company or any Wholly-Owned Subsidiary of indebtedness or obligations referred to in the foregoing clause (i); ---------- (iii) intercompany indebtedness owing by either Company or any Wholly-Owned Subsidiary to a Finance Subsidiary; (iv) increases in the maximum commitment amount (or, if no commitment amount is applicable, the outstanding principal amount) of indebtedness or obligations under any Financing Agreement relating to the initial Secured Indebtedness hereunder (it being understood that any reinstatement or return, for any reason whatsoever, of any payment of principal received by any Secured Party in respect of such Secured Indebtedness shall not be deemed to be an increase but rather a reinstatement of such Secured Indebtedness, which reinstated Secured Indebtedness shall continue to have the benefits of Secured Indebtedness hereunder without impairment and without any requirement for designation as Additional Secured Indebtedness hereunder); and (v) guarantees by either Company or any Wholly-Owned Subsidiary of increases referred to in the foregoing clause (iv). ----------- (2) Neither Company shall designate any indebtedness as Additional Secured Indebtedness, or classify any Additional Secured Indebtedness as Class A Secured Indebtedness, Class B Secured Indebtedness or Class C Secured Indebtedness, as the case may be, under this Collateral Trust Agreement if so doing would result in a breach of any of the terms and provisions of any Financing Agreement (after giving effect to any waiver). The Trustee shall have no duty to inquire as to whether any indebtedness so designated is in fact Additional Secured Indebtedness and the Trustee may conclusively rely upon any such designation by either Company. 21 2.5 Additional Secured Indebtedness Registration -------------------------------------------- (1) From time to time after the date hereof, agents, trustees or like representatives acting on behalf of Holders of any proposed Additional Secured Indebtedness under Section 2.4((1)(i), (ii) or (iii) (or, if such Holders are ------------------ ---- ----- unrepresented, the Holders themselves) may become Secured Party Representatives under this Collateral Trust Agreement and be entitled to the benefits of the security interests in the Collateral as set out herein and in the other Collateral Documents. To become a Secured Party Representative hereunder each such representative or Holder must deliver to the Trustee, for acceptance and registration in the Secured Indebtedness Register, an Additional Secured Indebtedness Registration Statement substantially in the form of Exhibit A, duly --------- executed by such prospective representative or holder and the Companies. Upon such delivery, acceptance and registration, such representative or holder shall have the rights of a Secured Party Representative set out in this Collateral Trust Agreement. (2) From time to time after the date hereof, a Secured Party Representative may register increases in commitment amounts, principal amounts and guaranties of indebtedness described in Section 2.4(1)(iv) or (v) as Additional Secured ------------------ --- Indebtedness by the delivery to the Trustee, for acceptance and registration in the Secured Indebtedness Register, of an Additional Secured Indebtedness Registration Statement substantially in the form of Exhibit A, duly executed by --------- such Secured Party Representative and the Companies. Upon such delivery, acceptance and registration, such increases in commitment amounts, principal amounts and guaranties shall have the benefits of Additional Secured Indebtedness under this Collateral Trust Agreement. (3) The Trustee shall maintain at its office in New York City a copy of each Additional Secured Indebtedness Registration Statement delivered to and accepted by it in accordance with subsection (4) below. -------------- (4) The Trustee shall not accept for registration any Additional Secured Indebtedness Registration Statement if such Additional Secured Indebtedness Registration Statement is not substantially in the form of Exhibit A. Subject --------- at all times to the immediately preceding sentence and to subsection (5) below, -------------- the Trustee shall accept and register Additional Secured Indebtedness Registration Statements in the order received. (5) If upon receipt of any Additional Secured Indebtedness Registration Statement the Trustee deems it advisable, in its sole discretion, to require clarification of any information set forth therein or if any Additional Secured Indebtedness Registration Statement contains information not conforming to Exhibit A, the Trustee may, in its sole discretion, postpone the registration - --------- of any such Additional Secured Indebtedness Registration Statement for not longer than thirty (30) days after receipt thereof. If the Trustee postpones the registration, it shall (i) make a provisional notation on the Secured Indebtedness Register of the information required to be registered in the Secured Indebtedness Register, and (ii) promptly contact the 22 Companies and the Secured Party Representative or prospective representative delivering such Additional Secured Indebtedness Registration Statement in writing requesting any necessary clarification. Within thirty (30) days after receipt by the Trustee of any such Additional Secured Indebtedness Registration Statement, if the Companies and such Secured Party Representative or prospective representative provide a clarification to the satisfaction of the Trustee, or a Secured Parties' Order is delivered approving any non-conforming information contained in such Additional Secured Indebtedness Registration Statement, the Additional Secured Indebtedness Registration Statement shall be deemed to have been registered in the Secured Indebtedness Register on the date the Trustee made the provisional notation referred to in clause (i) of the immediately ---------- preceding sentence. If the Trustee does not receive such clarification or such approval within thirty (30) days after the receipt by the Trustee of any such Additional Secured Indebtedness Registration Statement, the Trustee shall reject the Additional Secured Indebtedness Registration Statement and the provisional notation referred to above shall have no effect for any purpose hereunder. (6) If pursuant to subsection (4) or (5) above, the Trustee rejects any -------------- --- Additional Secured Indebtedness Registration Statement, it shall promptly forward such Additional Secured Indebtedness Registration Statement to the parties thereto with a written notation stating the basis of such rejection. The parties thereto may resubmit a corrected Additional Secured Indebtedness Registration Statement to the Trustee for acceptance and registration in accordance with this Section. 2.6 Designation of Class for Additional Secured Indebtedness -------------------------------------------------------- Upon the designation of any Additional Secured Indebtedness, the Companies shall determine, as of the date of the creation and issuance thereof, with the holders thereof whether such Additional Secured Indebtedness shall be Class A Secured Indebtedness, Class B Secured Indebtedness or Class C Secured Indebtedness, it being understood that any Secured Indebtedness owing to any member of the Group shall be Class D Secured Indebtedness, and such determination shall be set forth in the related Additional Secured Indebtedness Registration Statement, together with the certification by the Companies to the effect that (i) the incurrence and securing of such additional indebtedness or obligations is permitted by and will not result in any breach of any Financing Agreement, and (ii) the proposed classification of such additional indebtedness or obligations complies with the terms of Section 2.4(2) hereof and has been -------------- approved by the requisite parties to any Financing Agreement(s) under which such approval is required. 2.7 No Notice of Trusts or Agency ----------------------------- Neither the Companies nor the Trustee shall be bound to take notice of or see to the execution of any trust or agency, whether expressed, implied or constructive, in respect of any Secured Indebtedness. In particular, notwithstanding that any Secured Party Representative shall be acting for certain Holders, the Trustee shall not be obliged to enquire 23 into the necessity, expediency, authority or regularity of or for any action by such Secured Party Representative and the Trustee shall be entitled to rely conclusively on any direction from such Secured Party Representative. The Trustee shall be entitled to conclusively rely on any direction delivered by any party claiming to be a Secured Party Representative or Enforcement Representative. ARTICLE III SECURITY 3.1 Grant of Senior Lien for Senior Secured Indebtedness. ----------------------------------------------------- In consideration of the premises and for other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged by the Pledgors, each Pledgor does hereby pledge, charge, assign and transfer to and in favor of the Trustee, and does hereby create and grant a first priority security interest in favor of the Trustee in, in trust for the benefit of the Trustee in such capacity, and for the equal and ratable benefit of all Senior Secured Parties, as security for (A) the due payment by the Companies of all amounts payable to the Trustee, the Enforcement Representatives and the Secured Party Representatives hereunder, (B) the payment by the Obligors of the Senior Secured Indebtedness, (C) the due performance of the obligations of the Companies contained herein, and (D) in the case of a Pledgor Subsidiary, the due performance by such Pledgor Subsidiary of its obligations contained herein, including, without limitation, its obligations under Article V, all of the --------- following property, whether now existing or hereafter arising (the "Collateral"): ---------- (a) the Initial Pledged Subsidiary Shares; (b) all Share Option Rights, to the fullest extent permitted by Applicable Law; (c) all other Pledged Property; (d) all Distributions, interest, other payments and rights, received or receivable, with respect to any Pledged Property; (e) all of LGII's right, title and interest in and to all rights to receive payment under or in respect of accounts, contracts, contract rights, chattel paper, documents, instruments, and general intangibles of LGII, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of LGII now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such accounts, contracts, contract rights, chattel paper, documents, instruments, and general intangibles (any and all such accounts, contracts, contract rights, chattel 24 paper, documents, instruments, and general intangibles being the "LGII ---- Receivables", and any and all such security agreements, guaranties, ----------- leases and other contracts being the "Related LGII Contracts"); ---------------------- (f) all proceeds of any of the foregoing; and (g) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 3.1. ----------- 3.2 Senior Lien Habendum -------------------- To have and to hold the Collateral and all rights hereby conferred unto the Trustee, its successors and assigns forever, but in trust nevertheless for the uses and purposes and subject to the terms and conditions herein set forth. 3.3 Grant of Junior Lien for Class D Secured Indebtedness ----------------------------------------------------- Each Pledgor does hereby pledge, charge, assign and transfer to and in favor of the Trustee and does hereby create and grant a security interest in favor of the Trustee in, in trust for the equal and ratable benefit of all Class D Secured Parties as security for the Class D Secured Indebtedness, all Collateral of such Pledgor, all on a basis junior and subordinate to and subject to the satisfaction in full of the Senior Secured Indebtedness and the obligations hereunder of the Companies and Pledgor Subsidiaries to the Senior Secured Parties and their Enforcement Representatives and the Senior Secured Indebtedness Termination; to have and to hold the Collateral and all rights hereby conferred unto the Trustee, its successors and assigns forever, but in trust nevertheless for the uses and purposes and subject to the terms and conditions herein set forth. 3.4 Delivery of Pledged Property; Registration of Pledge, Transfer, etc. -------------------------------------------------------------------- All certificates or instruments representing or evidencing any Pledged Property, including, without limitation, all Pledged Shares, shall be delivered to and held by or on behalf of (and, in the case of instruments evidencing any Collateral, endorsed in blank for transfer to, or to the order of) the Trustee pursuant hereto, shall be in suitable form for transfer by delivery and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank and undated, unless otherwise requested by a Secured Parties' Order; provided, however, that if any Pledged Shares comprise partnership -------- ------- interests, limited liability company membership interests or other equity interests other than shares in a corporation evidenced by share certificates, all such actions shall be taken, as specified by an opinion of Counsel delivered to the Trustee with respect to such Pledged Shares pursuant to Article VII, to ----------- grant to the Trustee valid fully perfected pledges and security interests in such Pledged Shares, and to that end (but without limiting the foregoing) each Pledgor agrees to 25 execute and deliver to any related Pledged Share Issuer a notice in the form of Exhibit C hereto on the date of pledge of such Pledged Shares not comprising - --------- shares in a corporation evidenced by share certificates. To the extent permitted by Applicable Law, the Trustee shall have the right, at any time after any Enforcement Order shall have been received by the Trustee and be outstanding, to transfer to, or to register in the name of, the Trustee or any of its nominees any or all of the Pledged Shares at the written direction of the Enforcement Committee. In addition, the Trustee shall have the right, at any time after any Enforcement Order shall have been received by the Trustee and be outstanding, to exchange certificates or instruments representing or evidencing any Pledged Shares for certificates or instruments of smaller or larger denominations at the written direction of the Enforcement Committee. Notwithstanding anything to the contrary herein, LGII shall not be required to deliver to the Trustee any chattel paper evidencing LGII Receivables or any Collateral described in Section 3.1(g) unless required by the Trustee when an -------------- Enforcement Order has been received by the Trustee and not waived. Notwithstanding anything to the contrary herein, the Trustee shall only be responsible for possession of Collateral delivered to it for which it signs a receipt. All Secured Parties acknowledge that the Trustee is only responsible for the possession of Collateral delivered to it for which it acknowledges receipt in writing. The Trustee agrees that it will promptly sign a receipt for any Collateral which is delivered to it. 3.5 Termination ----------- (1) The Senior Lien, the Junior Lien and the guaranty pursuant to Article V --------- shall terminate and the Collateral shall revert to and revest in the Pledgors without any release, acquittance, reconveyance, re-entry or other act or formality whatsoever if the Trustee shall have received: (i) a Release Order; and (ii) an Officers' Certificate of each of the Companies pursuant to subsection (2) below; -------------- and all amounts due to the Trustee hereunder, including without limitation, costs, charges and expenses referred to in Section 7.5 and interest thereon, ----------- shall have been paid. (2) Prior to the release of the whole of the Collateral pursuant to the receipt of a Release Order by the Trustee, the Trustee shall have received an Officers' Certificate from each of the Companies certifying that no Default has occurred and remains in effect with respect to any outstanding Class A Secured Indebtedness, Class B Secured Indebtedness, Class C Secured Indebtedness or Class D Secured Indebtedness, and that no Default or breach of any of the terms and provisions of any Financing Agreement would occur upon the termination of 26 the Senior Lien and the Junior Lien and the release of the whole of the Collateral (after giving effect to any waiver). Neither Company shall deliver such Officers' Certificate if any such Default or breach has occurred and remains in effect or would so occur upon the termination of the Senior Lien and the release of the whole of the Collateral. 3.6 Assignments ----------- Nothing in Section 3.1 or 3.3 shall be construed as an attempt to assign ----------- --- (which term shall include a sub-lease, mortgage, pledge, charge or the creation and granting of a security interest in) any lease, agreement, account, claim, demand or chose in action which, as a matter of law or (to the extent enforceable under Applicable Law) by its terms, is non-assignable without the consent of some other Person unless such consent shall have been given; in order, however, that the full value of the property described above may constitute security hereunder and may be realized by the Trustee for the benefit of the Secured Parties, each Pledgor shall, at its expense and at the direction of the Trustee acting upon a Secured Parties' Order or Enforcement Direction to that effect, in the name of such Pledgor or otherwise as the Trustee may specify, and whether as trustee for or agent of the Trustee or otherwise, take all such action and do or cause to be done all such things as shall, in accordance with such Secured Parties' Order or Enforcement Direction, be necessary or proper in order that the value of the property described above shall be preserved and shall enure to the benefit of the Trustee in trust for (i) first, the Senior Secured Parties, and (ii) on a subordinate basis, the Class D Secured Parties, provided, however, that no such action or thing -------- ------- jeopardizes or in the reasonable opinion of the Companies may jeopardize the rights of any Pledgor to any such property. 3.7 Discharge of Security --------------------- Upon receipt by the Trustee of a Release Order, and upon receipt by the Trustee of the Officers' Certificates pursuant to subsection 3.5(2), the Trustee ----------------- shall, upon payment of all costs, charges and expenses properly incurred by the Trustee in relation to this Collateral Trust Agreement and all interest thereon and of the remuneration of the Trustee, or upon provision satisfactory to the Trustee being made therefor, at the written request and at the expense of the Companies, execute such deeds or other instruments as shall be necessary to evidence the satisfaction and discharge of the security hereby created, to release or reconvey the Collateral freed and discharged from the trusts and provisions herein contained, except those relating to the indemnification of the Trustee and the Secured Parties, to release the Pledgors from any covenants contained in this Collateral Trust Agreement or in any other Collateral Document executed and delivered by a Pledgor, and do such acts as shall be necessary to release or discharge the security hereby created as the same may be registered, filed or recorded in any public office. The Trustee shall at the expense of the Pledgors forthwith provide written notice to the Secured Party Representatives of such discharge and release. 27 3.8 Additional Pledgors; Joinder Agreements --------------------------------------- If any Subsidiary which is not then a Pledgor hereunder (a "Non-Pledgor") ----------- acquires or otherwise comes to hold any shares, securities or other equity interests in a U.S. Subsidiary or a Canadian Subsidiary other than (in either case) an Excluded Subsidiary, the Pledgors shall forthwith cause such Non- Pledgor to become a Pledgor hereunder, by executing and delivering to the Trustee a Joinder Agreement substantially in the form of Exhibit B (a "Joinder --------- ------- Agreement"). - --------- ARTICLE IV POSSESSION, USE AND RELEASE OF COLLATERAL 4.1 Possession Until Enforcement Event ---------------------------------- (1) Provided that no Enforcement Event has occurred and is continuing, each Pledgor shall, notwithstanding Sections 3.1 and 3.3, be permitted, in the same ------------ --- manner and to the same extent as if this Collateral Trust Agreement had not been executed, but subject to compliance with the covenants contained herein and in the Financing Agreements, to use and enjoy the Pledged Shares, to sell, assign, transfer or otherwise dispose of (but not to pledge, encumber or otherwise grant a Lien except the Senior Lien and Junior Lien on) any of the Pledged Shares, to exercise all voting rights in respect of any of the Pledged Shares, to enter into arrangements or agreements relating to any such voting rights, to be entitled to the benefits of such arrangements and agreements, and to be entitled to the payment of any Distributions paid in respect of any Pledged Shares. (2) Provided that no Enforcement Event has occurred and is continuing, each Pledgor shall, notwithstanding Sections 3.1 and 3.3, be permitted, in the ------------ --- same manner and to the same extent as if this Collateral Trust Agreement had not been executed, but subject to compliance with the covenants contained herein and in the Financing Agreements, to possess, operate, manage, use and enjoy the Collateral other than the Pledged Shares, to sell, assign, transfer (including without limitation transfers in connection with securitizations and other receivables financings even if such transfers might constitute Liens), or dispose of or lease (but not otherwise to pledge, encumber or otherwise grant a Lien except Permitted Encumbrances on) any Collateral other than the Pledged Shares, to enter into arrangements or agreements relating to any Share Option Rights, to be entitled to the benefits of such arrangements and agreements, to be entitled to all benefits under the Share Option Rights, freely to control the conduct of the Business or of any other business carried on from time to time by the Group anywhere, to compromise and settle claims and law suits to which it is a party, to amend and modify agreements, leases, licenses, privileges, franchises, concessions or contracts, and to take and use the rents, incomes and profits of the Business or of any other business carried on from time to time by the Group anywhere including, without 28 limitation, amounts owed to any of the Group under accounts receivable now owned or hereafter acquired by any of the Group and payments and other property or rights to which any of the Group is entitled under any agreement now or hereafter entered into by any of the Group with any Person(s) or by reason of any matter, transaction or event heretofore, now or hereafter existing or occurring. 4.2 Disposition of Collateral; Voting Rights; Distributions ------------------------------------------------------- (1) No Pledgor shall sell, assign, transfer, mortgage, pledge, charge or otherwise encumber or dispose of any Collateral if an Enforcement Event has occurred and is continuing or if, after giving effect thereto or as a result of any such sale, assignment, transfer, mortgage, pledge, charge, encumbrance or disposition, an Enforcement Event would have occurred. (2) The proceeds of any encumbrance or disposition made in accordance with the provisions of Section 4.1 shall be received and used by the Pledgor making ----------- the same for such purposes as are not in breach of the provisions of this Collateral Trust Agreement and the Financing Agreements. (3) Each Pledgor agrees to deliver (properly endorsed where required hereby or requested by the Trustee) to the Trustee, promptly upon request of the Trustee (whether or not an Enforcement Event has occurred), such proxies and other documents as may be necessary to allow the Trustee to exercise the voting power at the direction of the Enforcement Committee with respect to any share of capital stock or other equity interest constituting Collateral other than equity interests in which the only interest of a Pledgor is a Share Option Right; provided, however, that, unless an Enforcement Event has occurred and is - -------- ------- continuing, the Trustee shall not be entitled to exercise, and each Pledgor shall be entitled to exercise, in its reasonable judgment, but in a manner that would not violate any provision of this Collateral Trust Agreement, the voting power and all other incidental rights of ownership with respect to any Pledged Shares or other shares of capital stock or other equity interest constituting Collateral (subject to such Pledgor's obligation to deliver to the Trustee such Pledged Shares and other shares in pledge hereunder). The Trustee agrees that unless an Enforcement Event has occurred and is continuing, the Trustee shall, upon the written request of a Pledgor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by such Pledgor which are necessary to allow such Pledgor to exercise such voting power with respect to any Pledged Shares. (4) So long as an Enforcement Event has occurred and is continuing, the Trustee shall have the sole and exclusive right and authority to receive and retain the Distributions and payments of principal or interest that each Pledgor would otherwise be authorized to retain. All Distributions, interest, principal, premium, if any, cash payments and proceeds made on or in respect of the Collateral which may at any time and from time to time be held by such Pledgor, shall, until delivery to the Trustee, be held by such Pledgor separate and apart from 29 its other property in trust for the Trustee. Any and all money and other property paid over to or received by the Trustee pursuant to the provisions of this clause (4) shall be retained by the Trustee as Collateral hereunder and be ---------- held and applied in accordance with the provisions of this Collateral Trust Agreement. 4.3 Releases when no Enforcement Event ---------------------------------- Dispositions of Collateral that are permitted by Section 4.1 shall not ----------- require any written or oral release or consent of the Trustee but any such release of Collateral in connection with such disposition shall require at least three Business Days advance notice to the Trustee if the Trustee is required to deliver Pledged Shares. Nevertheless, either Company may request (by delivering to the Trustee an Officers' Certificate to such effect) that the Trustee deliver and the Trustee shall deliver to a Pledgor or to any purchaser of Pledged Shares share certificates or other certificates relating thereto, and may request (by delivering to the Trustee an Officers' Certificate to such effect) that the Trustee execute and deliver to a Pledgor or to any purchaser of Collateral a written release, disclaimer or quit claim of the Trustee's interest in any Collateral or a consent to any modification of or change in any agreements, leases, licenses, privileges, franchises, concessions and contracts forming or which may be subsisting in respect of any part of the Collateral. The Trustee shall execute and deliver, and such purchaser shall be entitled to rely conclusively on, such release, disclaimer, quit claim or consent, provided that -------- the Trustee shall have received such Officers' Certificate at least two Business Days prior to the requested date of delivery. In addition, provided that no Enforcement Event has occurred and is continuing, upon the request of TLGI the Trustee shall deliver confirmations that the Trustee has not received written notice that the Collateral has become the subject of any realization or enforcement proceedings. Unless the Trustee has received an Enforcement Direction to the contrary when an Enforcement Order has been issued that has not been waived, the Trustee shall have no duty to collect any proceeds of any disposition of Collateral nor to require any substitution with respect to such disposed Collateral. TLGI may request, by delivery of an Officers' Certificate to the Trustee, in connection with any permitted disposition of Collateral consisting of a portion (but not all) of the Pledged Shares evidenced by one share certificate in the Trustee's possession, that the Trustee exchange such share certificate (and the related instruments of transfer or assignment held by the Trustee) for a substitute share certificate (together with all necessary instruments of transfer or assignment, duly executed in blank and undated) evidencing the portion of the Pledged Shares not to be released in such disposition, such substitute stock certificate to be issued contemporaneously with the permitted disposition. 4.4 Other Releases -------------- In addition to any other provisions hereof permitting a release of or any dealing in any part of the Collateral, the Trustee shall, upon receipt of a Release Order and the Officers' Certificates pursuant to and in full compliance with the terms and provisions of subsection ---------- 30 3.5(2), release the whole of the Collateral in the manner specified in such - ------ Release Order, or upon the receipt of a Secured Parties' Order, or Enforcement Direction to such effect (together with any Required Class D Secured Party Consent, if applicable), release any part of the Collateral or concur in any of the Pledgors' dealing with any part of the Collateral, in the manner specified in such Secured Parties' Order or Enforcement Direction. 4.5 Protection of Purchasers ------------------------ No purchaser or purchasers from, or other Person having dealings with any Pledgor or the Trustee or their respective permitted successors or assigns shall be obliged to inquire into the necessity, expediency, authority or regularity of or for any action or concurrence on the part of the Trustee or any release or other instrument taken or given under the provisions of this Article nor be obliged to enquire into the sufficiency of the performance by the Pledgor of any of the conditions upon which they are or may be entitled to any such action or concurrence or release or other instrument. 4.6 Proceeds Held in Trust ---------------------- Notwithstanding any other provisions of this Article: (1) any proceeds received by any Pledgor in contravention of this Article or Article VII, including, without limitation, the proceeds of any encumbrance ----------- or disposition contrary to Section 4.1 or 4.2; and ----------- --- (2) upon the occurrence and during the continuation of an Enforcement Event, all proceeds of any disposition, transfer, grant or release of Collateral held by any Pledgor; shall be held in trust by such Pledgor for the benefit of (i) first, the Senior Secured Parties, and (ii) on a subordinate basis, the Class D Secured Parties, and such Pledgor shall forthwith deliver to the Trustee the proceeds so held in trust. 4.7 Application of Moneys Held by Trustee ------------------------------------- (1) Any moneys received by the Trustee pursuant to the provisions of this Article and all other moneys at any time held by the Trustee pursuant to any other provisions hereof the disposition of which is not otherwise herein provided for shall be paid to and held by the Trustee in accordance with Section ------- 8.10. - ---- (2) In no case shall the receipt of moneys by the Trustee from releases or other dealings with the Collateral be deemed to be a payment of the Secured Indebtedness nor shall the Senior Lien or the Junior Lien be affected by reason of such receipt except as herein expressly provided. 31 4.8 Powers and Rights ----------------- The powers and rights conferred upon the Trustee and the Pledgors by this Article shall be deemed to be several and not dependent on each other and each such power or right shall accordingly be construed as complete in itself and not by reference to any other such power or right; and the exercise of any one or more of such powers or rights or any combination of them, from time to time, shall not be deemed to exhaust the right of the Trustee or any Pledgor to exercise such powers or rights or combination of them thereafter from time to time. 4.9 Liability of Trustee and Secured Parties ---------------------------------------- Neither the execution of this Collateral Trust Agreement nor the acceptance hereof by the Trustee shall in any way render the Trustee or any Secured Party liable for the observance or performance of any of the covenants, conditions or agreements on the part of any Pledgor contained in any agreements or licenses forming part of the Collateral. 4.10 Trustee Not Responsible for Value of Collateral ----------------------------------------------- Notwithstanding anything to the contrary contained herein, the Trustee shall not be responsible in any manner whatsoever for monitoring the value of the Collateral or the composition of the Collateral pool or any form of valuation. Prior to the occurrence of an Enforcement Event the Trustee shall not be required to receive any proceeds or substitute Collateral in connection with any release of Collateral. The Trustee makes no representation as to the value or adequacy of the Collateral. ARTICLE V GUARANTY OF SENIOR SECURED INDEBTEDNESS; UNCONDITIONAL OBLIGATIONS 5.1 Guaranty -------- Each Pledgor Subsidiary hereby unconditionally and irrevocably guarantees, to the fullest extent permitted by Applicable Law, the due and punctual payment (whether at stated maturity, upon acceleration or otherwise) and performance of all Senior Secured Indebtedness of the Obligors (including, without limitation, interest accruing following the filing of a bankruptcy petition by or against any Obligor, at the applicable rate or rates specified herein, whether or not such interest is allowed as a claim in bankruptcy). Upon failure by any Obligor to pay or perform any Senior Secured Indebtedness, such Pledgor Subsidiary shall forthwith on demand pay or perform such Secured Indebtedness, at the place, in the manner and with the effect otherwise specified in the related Financing Agreement. Such Pledgor Subsidiary hereby agrees that its guaranty of the Senior Secured Indebtedness pursuant to this 32 Article V is an absolute guaranty of payment and is not a guaranty of - --------- collection. The liability of any Pledgor Subsidiary under this Section and in respect of its grant of Collateral under Article III shall be limited to the ----------- amount that is U.S. $1.00 less than the maximum amount for which such Pledgor Subsidiary may be liable without rendering its obligations under this Section void or invalid. 5.2 Unconditional Obligations -------------------------- The obligations of each Pledgor Subsidiary under this Collateral Trust Agreement (including without limitation under Articles III and V) shall be ------------ - unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Obligors under any Financing Agreement or under any other instrument or document relating to the Secured Indebtedness or the exchange, release or non-perfection of any collateral security therefor (including, without limitation, the Collateral pledged hereunder); (b) any modification, amendment, supplement, extension, renewal or restatement of any Financing Agreement or under any other instrument or document relating to the Secured Indebtedness, or the release or termination of any guarantor, or the termination of any Financing Agreement or the release of any collateral pledged hereunder or thereunder; (c) any change in the corporate existence, structure or ownership of TLGI or any Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting TLGI, any Subsidiary or their respective assets; (d) the existence of any claim, set-off or other rights which such Pledgor Subsidiary may have at any time against any Obligor, any other guarantor, the Trustee, any Secured Party or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing -------- herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (e) any invalidity or unenforceability relating to or against TLGI or any Subsidiary for any reason of any provision or all of this Collateral Trust Agreement, any Financing Agreement, or any other instrument or document relating to the Secured Indebtedness, or any provision of applicable law or regulation purporting to prohibit the payment by the Obligors of Senior Secured Indebtedness or the payment or performance by any guarantor of any of its obligations under any guaranty; or 33 (f) any other act or omission to act or delay of any kind by the Obligors, any other guarantor, the Trustee, any Secured Party or any other Person or any other circumstance whatsoever which might, but for the provisions of this Section 5.2, constitute a legal or equitable discharge ----------- of such Pledgor Subsidiary's obligations hereunder. 5.3 Discharge; Reinstatement in Certain Circumstances ------------------------------------------------- A Pledgor Subsidiary's obligations hereunder shall terminate upon the earliest of (i) a termination pursuant to and in compliance with the terms and provisions of Section 3.5, and (ii) such Pledgor Subsidiary ceasing to be a ----------- Subsidiary by virtue of a permitted disposition thereof under Article IV. In ---------- addition, each Pledgor Subsidiary's obligations under Section 5.1, and its ----------- obligations with respect to the Senior Lien, shall, if earlier, terminate upon the Senior Secured Indebtedness Termination. The Trustee shall execute and deliver a confirmation of such termination in the form of Exhibit E upon --------- delivery by TLGI of its Officers' Certificate to such effect. If at any time any payment of any Senior Secured Indebtedness is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Obligor or any other Person or otherwise, such Pledgor Subsidiary's obligations hereunder (unless terminated pursuant to clause (ii) with respect to such ----------- payment shall be reinstated at such time as though such payment had been due but not made at such time. 5.4 Waiver ------ Each Pledgor Subsidiary irrevocably waives (for all purposes of this Collateral Trust Agreement, including without limitation Articles III and IV) ------------ -- acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any right be exhausted or any action be taken by the Trustee, any Secured Party or any other Person against the Obligors, any guarantor or any other Person or any collateral security (including, without limitation, the Collateral pledged hereunder). In addition, the Secured Parties may, without notice or demand and without affecting the liability of such Pledgor Subsidiary hereunder, from time to time, (a) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the Secured Indebtedness, or otherwise modify, amend or change the terms of any of the Financing Agreements or any other instrument or document relating to the Secured Indebtedness; (b) accept partial payments on all or any part of the Secured Indebtedness; (c) take and hold security or collateral (including, without limitation, the Collateral pledged under the Collateral Documents) for the payment of all or any part of the Secured Indebtedness, such Pledgor Subsidiary's obligations hereunder or any other guaranties of all or any part of the Secured Indebtedness or other liabilities of the Obligors; (d) exchange, enforce, waive and release any such security or collateral; (e) apply such security or collateral and direct the order or manner of sale thereof as in their discretion they may determine; and (f) settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of the Secured Indebtedness, such Pledgor Subsidiary's obligations hereunder, any other guaranty of all or any part of the Secured Indebtedness and any security or collateral for the 34 Secured Indebtedness or for any such guaranty. Any of the foregoing may be done in any manner, without affecting or impairing the obligations of such Pledgor Subsidiary hereunder. 5.5 Waiver of Subrogation Rights ---------------------------- For all purposes of this Collateral Trust Agreement, (including without limitation Articles III and V) until any Pledgor Subsidiary's obligations ------------ - hereunder are terminated in accordance with the first sentence of Section 5.3, ----------- such Pledgor Subsidiary hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, as amended, or otherwise) to the claims of the Secured Parties against the Obligors and the other Pledgors and all contractual, statutory or common law rights of reimbursement, contribution or indemnification from the Obligors and the other Pledgors and all "claims" (as such term is defined in the United States Bankruptcy Code, as amended) against the Obligors and the other Pledgors, which, in any such case, may otherwise have arisen in connection with this Collateral Trust Agreement. 5.6 Stay of Acceleration -------------------- In the event that acceleration of the time for payment of any of the Senior Secured Indebtedness hereunder is stayed upon the insolvency, bankruptcy or reorganization of the Obligors or any other Person, all such Senior Secured Indebtedness otherwise subject to acceleration under the terms of the Financing Agreements shall nonetheless be payable by each Pledgor Subsidiary hereunder forthwith on demand by the Trustee on behalf of the applicable Secured Party Representative. 5.7 Gross-up -------- All payments made by each Pledgor Subsidiary under Article III or this ----------- Article V shall be made in full, without set-off or counterclaim, and free of - --------- and without deduction or withholding for or on account of any present or future tax, duty, assessment, impost, levy or other similar charge, or any penalties, fines or interest thereon (a "Relevant Tax") imposed upon such Pledgor ------------ Subsidiary, the Obligors, the Trustee or any Senior Secured Party by the government of Canada (or any Governmental Body thereof) or by the government of any other country or jurisdiction (or any Governmental Body thereof) from or through which payments hereunder are actually made (each a "Taxing ------ Jurisdiction"). Such Pledgor Subsidiary, for the benefit of the Trustee and the - ------------ Senior Secured Parties, agrees that in the event any payments made by such Pledgor Subsidiary hereunder are subject to any deduction or withholding for or on account of any Relevant Tax, such Pledgor Subsidiary will pay to the Trustee or such Senior Secured Parties such additional amounts as may be necessary in order that the net amounts paid to the Trustee or such Senior Secured Parties pursuant to the terms of Article III or this Article V after imposition of any ----------- --------- such Relevant Tax (including deductions or withholdings applicable to additional amounts paid under this Section 5.7) shall be not less than the amounts ----------- specified in Article III or this Article V to be then due and payable, except ----------- --------- that no such additional amounts shall be payable hereunder to the Trustee or any Senior Secured Party that is liable for such Relevant Tax in respect of the relevant 35 payment solely by reason of such recipient (a) having a permanent establishment in the Taxing Jurisdiction, (b) being organized under the laws of the Taxing Jurisdiction or any political subdivision thereof, (c) being resident in the Taxing Jurisdiction by virtue of its domicile or place of management being in the Taxing Jurisdiction, (d) carrying on (or being deemed to carry on) business in the Taxing Jurisdiction, or (e) having failed to comply with a requirement under the applicable Financing Agreement to deliver a certificate with respect to exemption from such deduction or withholding to which such Person is otherwise entitled. If the Trustee or any Senior Secured Party pays any amount in respect of Relevant Tax, such Pledgor Subsidiary shall indemnify the Trustee or the Senior Secured Party, as the case may be, for such payment within 15 days of demand therefor by the Trustee or such Senior Secured Party. 5.8 Continuing Obligation: Further Acknowledgements ----------------------------------------------- The obligation of each Pledgor Subsidiary under this Collateral Trust Agreement shall be a continuing obligation (including, with respect to the guaranty of the Senior Secured Indebtedness under Section 5.1, a continuing ----------- guaranty) and a fresh cause of action under this Article V shall be deemed to --------- arise in respect of each Enforcement Event. Each Pledgor Subsidiary agrees with the Trustee that it will from time to time upon request by the Trustee, after receipt by the Trustee of a Secured Parties' Class Resolution (prior to the receipt by the Trustee of an Enforcement Order) or an Enforcement Direction (after receipt by the Trustee of an Enforcement Order) requesting the same, deliver to the Trustee within a reasonable period after request thereof all suitable acknowledgements (under its corporate seal, if requested) of its continued liability under this Collateral Trust Agreement and of the Senior Lien and Junior Lien and any other instrument or instruments in such form as Counsel may advise and as will prevent any action brought against it in respect of any default under this Collateral Trust Agreement or under the Senior Lien or Junior Lien being barred by any statute of limitations now or hereafter in force in the State of New York, the Province of British Columbia or elsewhere, and in the event of the failure of such Pledgor Subsidiary so to do such Pledgor Subsidiary hereby irrevocably appoints the Trustee to be the true and lawful attorney of such Pledgor Subsidiary to make, execute and deliver such written acknowledgement or acknowledgements or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of Counsel on which the Trustee may conclusively rely, to fully maintain and keep in force the liability of such Pledgor Subsidiary hereunder and under such pledge, assignment and/or security interest and charge. 5.9 Subordination of Claims ----------------------- As to any indebtedness owed by any other Pledgor or any other Obligor (any such Person, an "Other Obligor") to any Pledgor Subsidiary (the "Other Debt"), ------------- ---------- such Pledgor Subsidiary hereby subordinates such Other Debt to the Secured Indebtedness owed at any time to any Secured Party, and agrees that such Pledgor Subsidiary's right to recovery 36 against such Other Obligor shall be subordinate and subsequent to and not pari passu with the rights of any of the Secured Parties or the Trustee. As such, in the event of the sale of any of the Collateral or other realization of the security created hereby, or enforcement of the trusts hereunder, such Pledgor Subsidiary shall not be entitled to rank for payment on account of the Other Debt against the Pledged Property in competition with the Secured Parties or the Trustee. Until such Pledgor Subsidiary's obligations are terminated in accordance with the first sentence of Section 5.3, such Pledgor Subsidiary shall ----------- have no right of recovery against such Other Obligor or any of its assets in respect of such Other Debt. ARTICLE VI REPRESENTATIONS AND WARRANTIES Each Company (and each Pledgor Subsidiary as to matters affecting itself) represents and warrants to the Trustee and each Secured Party, as at the date of each pledge hereunder by such Pledgor to the Trustee of any Collateral, as set forth in this Article: 6.1 Ownership, No Liens, etc. ------------------------- Each Pledgor is the legal and beneficial owner of, and (to the extent such concept exists under Applicable Law) has good title to (and has full right and authority to pledge and assign), the Collateral pledged by it hereunder, free and clear of all Liens, except Permitted Encumbrances. 6.2 Corporate and Governmental Authorization; Contravention ------------------------------------------------------- Each Pledgor is duly organized, existing and (except when failure to be in good standing is not reasonably likely to have a Material Adverse Effect) in good standing in the jurisdiction of its incorporation or other organization and has all necessary corporate (or in the case of Pledgors which are not corporations, other) power and authority to execute, deliver and perform its obligations hereunder (and, if applicable, the Joinder Agreement to which it is a party). The execution, delivery and performance by each Pledgor of this Collateral Trust Agreement (and, if applicable, the Joinder Agreement to which it is a party) have been duly authorized by all necessary corporate action, have received all necessary Approvals, do not and will not conflict with, result in any violation of, or constitute any default under, any provision of any organizational or constituent document of any Pledgor or any Contractual Obligation binding on any Pledgor or its property or any Applicable Law, except where the violation of such Applicable Law is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, and will not result in or require the creation or imposition of any Lien on any of the properties of any Pledgor, except for the Permitted Encumbrances. 37 6.3 Binding Effect -------------- This Collateral Trust Agreement and any related Joinder Agreement each has been duly executed and delivered by each Pledgor and is the legal, valid and binding obligation of each Pledgor, enforceable in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, moratorium, insolvency, reorganization and similar laws affecting the rights of creditors generally and general principles of equity (regardless of whether considered in a proceeding in equity or law). 6.4 Valid Security Interest ----------------------- With respect to any Collateral, the delivery of such Collateral to the Trustee, if applicable, and the other actions, if any, described in the related Collateral Delivery Notice delivered to the Trustee, and the filing or registration of financing statements, if any, in the filing offices described in the related Collateral Delivery Notice delivered to the Trustee, are effective to create a valid, fully perfected, first priority security interest in such Collateral and all proceeds thereof, securing the Senior Secured Indebtedness and the due performance of the obligations of each Pledgor contained herein and a valid, fully perfected second priority security interest in such Collateral and all proceeds thereof, securing the Class D Secured Indebtedness. 6.5 As to Collateral ---------------- All of the Pledged Shares are duly authorized and validly issued and (in the case of shares of corporations) fully paid and non-assessable. All of the instruments evidencing LGII Receivables have been duly authorized, executed, endorsed, issued and delivered, and are the legal, valid and binding obligation of the maker thereof, and such maker is not in default under any of such instruments. 6.6 Authorization, Approval, etc. ----------------------------- Except for those already made or obtained and which remain in full force and effect on the date hereof, and those listed on Schedule 4 hereto, no ---------- Approval, or other action by, and no notice to or filing with, any Governmental Body or any other Person is required for the grant by any Pledgor of the Senior Lien and the Junior Lien on any Collateral pursuant to this Collateral Trust Agreement or for the execution, delivery, or performance of this Collateral Trust Agreement or any Joinder Agreement by any Pledgor. 38 6.7 All Shares Pledged ------------------ Each Pledgor has pledged under this Collateral Trust Agreement, and has delivered to the Trustee to the extent required hereby, all of the shares of capital stock, or granted a security interest in its ownership interest in, all partnership interests, limited liability company membership interests and other equity interests, in each case which it directly owns in all Canadian Subsidiaries and U.S. Subsidiaries, except Excluded Subsidiaries. Schedule 2 ---------- hereto as from time to time supplemented in accordance herewith correctly describes all Pledged Shares and the Pledgor which owns such Pledged Shares. 6.8 Solvency -------- Immediately prior to and after giving effect to each Pledgor's undertaking of its obligations hereunder (including by way of guaranty and the provision of security), such Pledgor is solvent, is able to pay its debts and liabilities as they mature and in the usual course of business, owns property and assets with fair saleable or realizable value greater than the amount required to pay its debts and liabilities and has capital sufficient to carry on its business as then constituted, and the giving of such financial assistance is in the best interests of such Pledgor. ARTICLE VII COVENANTS OF THE PLEDGORS 7.1 Title to Property ----------------- Each Pledgor covenants with the Trustee (and each Company covenants with respect to all Pledgors) that: (1) such Pledgor is and will be the lawful holder of legal title to its property and assets from time to time forming part of the Collateral; (2) such Pledgor has and will have good and lawful authority to charge, assign, pledge, transfer or create and grant a security interest in, its Collateral hereby or by any instrument supplemental or ancillary hereto; and (3) its Collateral is and will be free and clear of any Lien, other than Permitted Encumbrances. 7.2 Observance and Performance -------------------------- (1) Each Pledgor covenants with the Trustee that it will observe and perform all its obligations and do all matters and things necessary or expedient to be done, observed or 39 performed under or by virtue of any law, regulation, rule, order, lawful direction or other requirement of any Governmental Body for the purpose of creating and maintaining the Senior Lien and the Junior Lien and for the purpose of the performance of the trusts hereby created, save and except as may be permitted by a Secured Parties' Order, Release Order or Enforcement Direction, as the case may be. (2) Within 60 days following the end of each calendar year, each of the Companies shall deliver to the Trustee an Officers' Certificate, stating that, to the best of the signers' knowledge, each Pledgor is in compliance with the requirements of this Article, together with an opinion of Counsel (i) evidencing that the provisions of Sections 7.3 and 7.4 have been complied with in ------------ --- establishing the Senior Lien and Junior Lien as valid, and effective perfected security interests with respect to all Collateral, acquired or arising during such calendar year, and (ii) the maintenance of the Senior Lien and Junior Lien as such with respect to Collateral covered by financing statements and instructions as to what action, if any, must be taken to maintain the perfection of the Senior Lien and Junior Lien with respect to Collateral covered by financing statements during the next calendar year following the date of delivery of such opinion. The opinion of Counsel being delivered shall bring down, or be in substantially the form of, the opinions delivered on the Closing Date in respect of such matters. The Companies will send photocopies of the certificates and opinions delivered pursuant to this Section 7.2(2) to each -------------- Secured Party Representative at the same time that such items are delivered to the Trustee. 7.3 Registrations and Deliveries ---------------------------- Each Pledgor covenants with the Trustee that: (1) concurrently with its execution of this Collateral Trust Agreement or a Joinder Agreement, as the case may be, and immediately upon its acquisition thereof from time to time thereafter, it shall deliver to the Trustee share certificates evidencing the shares subject to the security interests hereby created, together with all necessary instruments of transfer or assignment, duly executed in blank and undated; (2) forthwith after the execution of this Collateral Trust Agreement or a Joinder Agreement, as the case may be, and from time to time after the execution of each instrument supplemental or ancillary hereto, such Pledgor shall register, file or record the same and/or, if applicable, a financing statement or other prescribed statement in respect thereof at all offices where such registration, filing or recording may be necessary or of advantage in preserving or protecting the Senior Lien and the Junior Lien with respect to the Collateral owned by such Pledgor; (3) from time to time, such Pledgor shall timely renew such registration, filing or recording and take any other action as timely required to maintain the Senior Lien as a 40 valid and effective first priority perfected security interest or to maintain the Junior Lien as a valid and effective second priority perfected security interest; (4) promptly after any such delivery, registration, filing, recording, renewal or other action by such Pledgor pursuant to clauses (1), (2) and (3) above, ----------- --- --- such Pledgor shall cause to be delivered to the Trustee a Collateral Delivery Notice describing such delivery, registration, filing, recording or renewal and certifying that the provisions of this Section have been complied with in respect of this Collateral Trust Agreement, the Joinder Agreement (if any) to which it is a party or such supplemental or ancillary instrument, as the case may be, and describing all appropriate modifications to Schedule 2 (which the Trustee is authorized to make), ---------- together with (in the case of Collateral other than pledged shares in a corporation evidenced by share certificates) an opinion of Counsel to the effect that the provisions of this Section have been complied with in respect of the perfection of the Senior Lien and the Junior Lien on such Collateral, provided that such Counsel shall not be required to opine on -------- the priority of any Lien; (5) forthwith after its execution of this Collateral Trust Agreement or a Joinder Agreement, as the case may be, and from time to time thereafter, it shall cause to be delivered to the Trustee such documents of title, share certificates and other documents as, are necessary to be delivered to preserve or protect the Senior Lien and the Junior Lien in the property represented by such documents of title, share certificates and other documents; (6) following the receipt by the Trustee of an Enforcement Order which has not been waived, such Pledgor will from time to time give all notices and directions which the Trustee may consider expedient; and (7) notwithstanding anything to the contrary set forth herein, the Trustee shall have no duty to maintain the perfection or priority of the security interests herein, or to maintain the security interests provided for herein except (A) to maintain the possession of Collateral for which the Trustee has signed a receipt or (B) as directed in an opinion of Counsel required to be delivered herein or (C) as specifically directed in a Company Order or (D) in a Secured Parties Class Resolution or in a Secured Parties Order. 7.4 After-Acquired Property and Further Assurances ---------------------------------------------- Each Pledgor covenants and agrees that: (1) all rights hereafter acquired by such Pledgor under any Share Option Agreement and all shares of the capital stock or other equity interests of any of the Canadian Subsidiaries or U.S. Subsidiaries (that, in each case, is not an Excluded Subsidiary) 41 acquired by or issued to such Pledgor after the date hereof, including, without limitation, any such shares or equity interests acquired by or issued to such Pledgor to replace any shares or equity interests released from the Senior Lien and the Junior Lien and all shares or equity interests resulting from the conversion, change, reclassification, subdivision or consolidation of any of the Pledged Shares or from any Distribution in respect of any of the Pledged Shares, which by this Collateral Trust Agreement are, or are intended to become, part of the Pledged Shares (all such rights, shares and equity interests being hereinafter referred to as "After-Acquired Property") shall, upon the acquisition thereof by or the ----------------------- issuance thereof to such Pledgor and without any further pledge, charge, assignment or act on the part of such Pledgor or the Trustee, become and be subject to the Senior Lien and the Junior Lien as fully and completely as though now owned by such Pledgor (but in the case of Share Option Rights, only to the fullest extent permitted by Applicable Law), and specifically described or referred to herein, but subject to Permitted Encumbrances; (2) notwithstanding subsection (1), such Pledgor shall from time to time -------------- execute and deliver all such further share certificates, deeds or other instruments of pledge, charge or assignment, of any After-Acquired Property or of any property intended to be subject to the Senior Lien and the Junior Lien but subject to Permitted Encumbrances, as are required by the provisions hereof or as, in the opinion of Counsel, are necessary or desirable for the purpose of effectively pledging, charging, assigning or creating and granting a security interest in such After-Acquired Property or other property to and in favor of the Trustee as and by way of a pledge, charge, assignment and/or security interest but subject to Permitted Encumbrances for the purpose of and upon the conditions specified herein or for the purpose of registering, filing, recording, re-registering, refiling or re-recording such pledge, charge, assignment and/or security interest; and (3) in the case of LGII, without limiting the generality of the foregoing, LGII will: (a) if any LGII Receivable shall be evidenced by a promissory note, other instrument or negotiable document, deliver and pledge to the Trustee hereunder such promissory note, instrument or negotiable document duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Trustee; (b) if an Enforcement Order has been issued and not waived, furnish to the Trustee, from time to time at the Trustee's request, statements and schedules further identifying and describing the LGII Receivables and Related LGII Contracts and such other reports in connection with the LGII Receivables and Related LGII Contracts as the Trustee may reasonably request, all in reasonable detail; and 42 (c) keep its principal place of business and chief executive office and the office(s) where it keeps its records concerning the LGII Receivables located at 50 East River Center Boulevard, Covington, Kentucky 41011, or upon 30 days' prior written notice to the Trustee, at such other locations in a jurisdiction where all actions required by this Section shall have been taken with respect to the LGII Receivables; not change its name except upon 30 days' prior written notice to the Trustee; hold and preserve such records and chattel paper; and permit representatives of the Trustee at any time during normal business hours to inspect and make abstracts from such records and chattel paper; and (4) without limiting the foregoing provisions of this Section, such Pledgor shall, from time to time at its own expense, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Trustee may request, in order to perfect, preserve and protect the Senior Lien and the Junior Lien granted or purported to be granted by this Collateral Trust Agreement or to enable the Trustee to exercise and enforce its rights and remedies under this Collateral Trust Agreement with respect to the Collateral; and (5) if an Enforcement Order has been issued and not waived, at the request of the Trustee, acting at the direction of the Enforcement Committee, such Pledgor shall (i) cause the termination of any voting trusts and related agreements in effect with respect to any related Pledged Share Issuer, and (ii) take, and cause each Pledged Share Issuer and its board of directors to take, any and all action requested by the Trustee at the direction of the Enforcement Committee to enable Pledged Shares and other Collateral to be freely transferable to the Trustee, its nominees, and such other Persons as the Enforcement Committee may direct; and (6) following the issuance of an Enforcement Order, such Pledgor will cause to be obtained and maintained in full force and effect all Approvals, and will make all notices to and filings with all Governmental Bodies and all other Persons which are necessary or desirable for the exercise by the Trustee of the voting or other rights (as directed by an Enforcement Direction) provided for in this Collateral Trust Agreement and the exercise of the remedies in respect of the Collateral which such Pledgor pledges or grants a security interest in pursuant to this Collateral Trust Agreement. 7.5 Trustee's Remuneration and Expenses ------------------------------------ The Companies jointly and severally covenant with the Trustee that they will pay to the Trustee forthwith upon demand from time to time reasonable remuneration for its services hereunder and will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee (including the reasonable compensation and the disbursements of its counsel and all other advisors and assistants not regularly in its employ) in connection with: 43 (1) any discharge of all or any portion of the Senior Lien or the Junior Lien; (2) the administration or execution, prior to receipt of an Enforcement Order by the Trustee, of the trusts hereby created; or (3) the administration or execution, after receipt of an Enforcement Order by the Trustee, of the trusts hereby created and thereafter until all duties of the Trustee under the trusts hereof shall have been finally and fully performed; except any such expense, disbursement or advance as may arise from its gross negligence or bad faith or in connection with proceedings in respect of which a final judicial determination is made that the Trustee was not entitled to take such proceedings. Any amount due under this Section shall bear interest at an annual rate equal to the Base Rate. All amounts so payable and the interest thereon shall be secured hereby and, subject to Section 8.10, the Trustee shall ------------ be secured by the Senior Lien and the proceeds thereof in priority to all other amounts secured hereby and after acceleration such amounts and interest shall be payable out of any funds coming into the possession of the Trustee or its successors in the trusts hereunder. The Companies shall jointly and severally indemnify the Trustee (in its capacity as Trustee) and each of its officers, directors, attorneys-in-fact and agents for, and hold it harmless against, any loss or liability or expense (including, without limitation, reasonable attorneys' fees and expenses) incurred by it in connection with the administration of this trust and its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except for any loss, liability or expense incurred by reason of the Trustee's gross negligence or willful misconduct. When the Trustee incurs expenses in connection with the occurrence of a bankruptcy or the appointment of a receiver relating to the Pledgors, the expenses and compensation for those services are intended to constitute expenses of administration under any bankruptcy or receivership law. The obligations of the Companies under this Section 7.5 shall survive any ----------- satisfaction and discharge or termination of this Collateral Trust Agreement, including any termination under any bankruptcy or receivership law. 7.6 Notification of Change of Name ------------------------------ None of the Pledgors shall change its name without giving at least 30 days' prior written notice to the Trustee of the new name and the date upon which such change of name is to take effect and, within ten Business Days of the change of name, it shall provide the Trustee with a notarial or certified copy of the articles of amendment, articles of merger or amalgamation or other instrument or certificate effecting the change of name. 44 7.7 Companies Undertakings ---------------------- The Companies jointly and severally agree to cause each Pledgor to duly and punctually perform all of such Pledgor's covenants and agreements set forth in this Collateral Trust Agreement. 7.8 Exceptions to Approvals ----------------------- Notwithstanding any other provisions of the Collateral Trust Agreement, the Pledgors, or any of them, shall not be required to take the actions described in Section B of Schedule 4 hereto prior to the effectiveness of an Enforcement ---------- Order. 7.9 Consent of Louisiana Department of Insurance -------------------------------------------- No foreclosure, seizure, sale or voting by the Trustee of the Pledged Shares of any of Security Industrial Insurance Company, Security Industrial Fire Insurance Company, Acadian Insurance Company and First Capital Insurance Company of Louisiana may be made without the prior written consent of the Louisiana Department of Insurance. Each Company, and each Pledgor which owns any of such stock, agrees to use its best efforts following any Enforcement Order to obtain such consent and to assist the Trustee in obtaining such consent. ARTICLE VIII ENFORCEMENT 8.1 Enforcement Event and Enforcement Order --------------------------------------- An "Enforcement Event" shall be deemed to have occurred when: (1) there is an acceleration of a U.S. Dollar Equivalent of at least U.S.$25,000,000 of any Class of any Senior Secured Indebtedness, in accordance with the related Financing Agreement(s), and such acceleration has not been revoked, cancelled or rescinded by the Secured Party Representative(s) for such Senior Secured Indebtedness in accordance with the terms and provisions of the related Financing Agreement(s), or there has been a default, after any applicable grace period, in the payment when due at its final maturity of a U.S. Dollar Equivalent of at least U.S.$25,000,000 of any Senior Secured Indebtedness; and (2) the Secured Party Representative(s) for such accelerated or defaulted Senior Secured Indebtedness certify in writing to the Trustee that either of the conditions in clause (1) have been met and direct the Trustee in ---------- writing to call a vote of each Class of Senior Secured Indebtedness on whether an Enforcement Event shall be declared; and 45 (3) a Secured Parties' Class Resolution for any Class of Senior Secured Indebtedness is delivered to the Trustee approving the declaration of an Enforcement Event. Upon the occurrence of an Enforcement Event, the related Secured Party Representatives for the Class of Senior Secured Indebtedness which declared the Enforcement Event may direct the Trustee by a Secured Parties' Class Resolution of such Class (an "Enforcement Order") to establish an Enforcement Committee ----------------- pursuant to Article XI and proceed to enforce the Senior Lien upon the direction ---------- of the Enforcement Committee. 8.2 Trustee Bound to Enforce ------------------------ (1) The Trustee shall not proceed to realize upon the Senior Lien or the Junior Lien and to enforce its rights hereunder unless and until the Trustee shall have received an Enforcement Order. (2) Upon the receipt of an Enforcement Order by the Trustee and upon receipt of indemnification pursuant to subsection 12.2(2) if so required by the Trustee, ------------------ the Trustee shall enforce its rights hereunder, but except as otherwise provided in Section 11.13, only upon receipt of and in compliance with ------------- Enforcement Directions. 8.3 Enforcement by the Trustee -------------------------- (1) In enforcing its rights hereunder pursuant to subsection 8.2(2), the Trustee ----------------- may, pursuant to and in accordance with any applicable Enforcement Direction, enforce such rights by any or all of the following: (a) a demand upon any Pledgor Subsidiaries for payment under Article V; --------- (b) the appointment of a Receiver under Section 8.4; ----------- (c) a sale under Section 8.5; ----------- (d) a judicial proceeding under Section 8.6; ----------- (e) proceedings in any court of competent jurisdiction for the appointment of a Receiver or for sale of the Collateral or any part thereof or for foreclosure; and (e) generally any other action, suit, remedy or proceeding authorized or permitted by this Collateral Trust Agreement or by law or by equity, including the exercise of its rights as a secured party under the U.C.C., the Personal Property Security Act (British Columbia), any other Uniform ------------------------------ ------- Commercial Code as now or hereinafter adopted in any applicable state in --------------- the United States of America, and any other similar legislation in any applicable jurisdiction; 46 and may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Secured Parties lodged in any bankruptcy, winding-up or other judicial proceeding relative to any Pledgor (it being understood and agreed that each Secured Party may act with respect to and vote its claim independently of the other Secured Parties in any bankruptcy proceeding) and no such remedy for the realization of the security hereof or for the enforcement of the rights of the Secured Parties and the Trustee shall be exclusive of or dependent on any other such remedy but any one or more of such remedies may from time to time be exercised independently or in combination. Further, no taking of any judgment or order in respect of any of the covenants contained in this Collateral Trust Agreement shall operate as a merger of any of the said covenants or operate to prevent any further judgment or order in respect thereof or any further remedy for the enforcement of the Senior Lien or the Junior Lien. (2) Upon the Trustee receiving any Enforcement Order or Enforcement Direction, the Trustee shall forthwith give written notice thereof to all Secured Party Representatives (other than, prior to the Senior Secured Indebtedness Termination, written notice of Enforcement Directions to Secured Party Representatives for the Holders of Class D Secured Indebtedness). An Enforcement Order or Enforcement Direction shall bind all Secured Parties. 8.4 Appointment of Receiver ----------------------- (1) If the Trustee shall have been directed or been required to appoint a Receiver pursuant to an Enforcement Direction, the following provisions shall apply. (2) Such appointment shall be made by the Trustee in writing or by court order under Section 8.6. Pursuant to an Enforcement Direction, the Trustee may from ----------- time to time in the same manner remove or replace any Receiver (except any Receiver appointed pursuant to subsection 8.6(4)) so appointed and appoint ----------------- another in his stead. In making any such appointment and only for such purpose, the Trustee shall be deemed to be acting as the agent and attorney of each Pledgor. (3) Any such appointment may be limited to any part or parts of the Collateral or may extend to the whole thereof as the Trustee shall have determined subject to any applicable Enforcement Direction. (4) Every such Receiver may in the discretion of the Trustee be vested with all or any powers and discretion which the Trustee is entitled to under this Article, including without limiting the foregoing, the power to: (a) take possession of, collect and get in all or any part of the Collateral and, for that purpose, to take proceedings in the name of any Pledgor or otherwise and to make any arrangement or compromise; and 47 (b) sell or concur in selling all or any part of the Collateral without notice and in such manner as may seem advisable to the Receiver and to effect such sale by conveying the Collateral in the name and on behalf of any Pledgor or otherwise and the Receiver shall be vested with such powers and discretion of the Trustee as are granted to him in the instrument of appointment and any supplement thereto. (5) The Trustee may from time to time fix the reasonable remuneration of every such Receiver (except any Receiver appointed pursuant to subsection 8.6(4)) and ----------------- direct the payment of such remuneration out of the Collateral, the income therefrom or the proceeds thereof. (6) The Trustee may, pursuant to an Enforcement Direction, from time to time require any such Receiver (except any Receiver appointed pursuant to subsection 8.6(4)) to give security for the performance of his duties and may - ----------------- fix the nature and amount thereof, but shall not be bound to require such security. (7) Every such Receiver shall for all purposes be deemed the agent of each Pledgor and in no event the agent of the Trustee or the Secured Parties and the Trustee shall not, in making or consenting to such appointment pursuant to an Enforcement Direction, incur any liability to the Receiver for his remuneration or otherwise howsoever. (8) The Trustee may pursuant to an Enforcement Direction pay over to such Receiver any moneys constituting part of the Collateral to the extent that the same may be applied for the purposes hereof by such Receiver, and the Trustee may from time to time determine what funds the Receiver shall be at liberty to keep in hand with a view to the performance of his duty as such Receiver. (9) Every such Receiver may, with the consent in writing of the Trustee pursuant to an Enforcement Direction, borrow money for the purposes of carrying on the business of any of the Group or for the maintenance, protection or preservation of the Collateral or any part thereof, and the Receiver may issue certificates (the "Receiver's Certificates") for such sums as will, in the ----------------------- opinion of the Trustee pursuant to an Enforcement Direction, be sufficient for obtaining upon the security of the Collateral or any part thereof the amounts from time to time required, and such Receiver's Certificates may be payable at such time or times as the Trustee may specify pursuant to an Enforcement Direction, and shall bear interest as shall therein be declared, and the Receiver may sell, pledge, or otherwise dispose of the same in such matter as the Trustee may pursuant to an Enforcement Direction deem advisable, and may pay such commission on the sale thereof as to the Trustee may pursuant to an Enforcement Direction appear reasonable, and the amounts from time to time payable by virtue of such Receiver's Certificates shall form a charge upon the Collateral in priority to the Secured Indebtedness. 48 8.5 Sale by Trustee --------------- (1) If the Trustee shall have been directed in an Enforcement Direction to realize upon the Senior Lien or the Junior Lien by sale, the Trustee shall have the right, on giving at least 30 days' notice to the Companies and the related Pledgor(s) or such other longer period of notice as may be required from time to time by Applicable Law and with or without entry or possession, to sell and dispose of all or any part of the Collateral en bloc or in parcels, at public auction or by tender or by private contract and at such time or times and on such terms and conditions, which shall include in case of sale by auction or tender a reasonable reserve bid, as the Trustee shall determine having first given such notice of the time and place of such sale as it may think proper pursuant to an Enforcement Direction. (2) In exercising its rights hereunder, the Trustee may: (a) make any such sale whether by auction, tender or private contract, either for cash or upon credit or partly for one and partly for the other, and in the case of a sale upon credit, the Trustee shall be bound to pay to the related Pledgors only such moneys as have been actually received from purchasers after the satisfaction of the claims of the Secured Parties, the Trustee hereunder and such other claims as the Trustee may be obligated to pay, upon such commercially reasonable conditions as to terms of payment as it may deem proper; (b) rescind or vary any contract of sale that may have been entered into and resell with or under any of the powers conferred herein; (c) stop, suspend or adjourn any sale from time to time and hold the sale as adjourned without further notice; and (d) deliver to the purchaser or purchasers of the Collateral or any part thereof good and sufficient deed or deeds, bills of sale or other instruments of transfer for the same, and any such purchaser or purchasers shall not be bound to see to the propriety or regularity of any sale or be affected by express notice that any sale is improper and no want of notice or publication when required hereby shall invalidate any sale hereunder. (3) Each Pledgor agrees that in any sale of any of the Collateral the Trustee is authorized to comply with any limitation or restriction in connection with such sale as Counsel may advise the Trustee is necessary in order to avoid any violation of Applicable Law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Body, and each 49 Pledgor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Trustee or any Secured Party be liable nor accountable to such Pledgor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. 8.6 Other Judicial Remedies ----------------------- Without prejudice to the generality of Section 8.3 but subject to any ----------- applicable Enforcement Direction, the Trustee shall, as directed by an Enforcement Direction, take proceedings in any court of competent jurisdiction for an order: (1) enforcing its rights hereunder; (2) directing the Pledgors' right of redemption (if any) of the Collateral or any part thereof, which is the subject of such proceedings, be foreclosed; (3) directing the sale of any of the Collateral, which is the subject matter of such proceedings, free from the right of redemption (if any) of any Pledgor; or (4) appointing a Receiver to take possession of the Collateral or such part thereof as may be the subject matter of such proceedings with some or all of the powers and rights set forth in Section 8.4 and such additional ----------- powers and rights as the court may direct. 8.7 Waiver of Enforcement Order --------------------------- (1) Subject to subsection (2), in case an Enforcement Event shall have occurred -------------- and the Trustee shall have received an Enforcement Order, a Secured Parties' Class Resolution of each Class which gave an Enforcement Order may instruct the Trustee to waive and the Trustee shall thereupon waive enforcement of the Senior Lien and Junior Lien at such time upon such terms and conditions as may be prescribed by such Secured Parties' Class Resolution, provided that neither such -------- waiver nor any act or omission of the Trustee or any of the Secured Parties shall extend to or be taken in any manner whatsoever to affect any subsequent Enforcement Event or Enforcement Order. (2) If the Trustee has received more than one Enforcement Order, instructions pursuant to subsection (1) to waive enforcement in respect of one such -------------- Enforcement Order shall not affect any other Enforcement Order delivered in accordance with the terms hereof. (3) If as a result of any Enforcement Order, the Trustee shall have taken any steps pursuant to the provisions of this Collateral Trust Agreement to enforce the Senior Lien or the Junior Lien and subsequently such enforcement shall be waived by the appropriate Senior Secured Parties as herein provided, the Trustee shall, at the request and at the cost of the 50 Pledgors, take such action as may reasonably be required to restore the position which prevailed immediately prior to the taking of such steps by the Trustee, including without limitation under, the U.C.C., the Personal Property Security -------------------------- Act (British Columbia), the Law and Equity Act (British Columbia) or any other - --- ---------------------- applicable legislation, subject, however, to any condition or conditions imposed by the appropriate Senior Secured Parties in such waiver, and neither the Trustee [nor any Receiver theretofore appointed by the Trustee or by a court] shall incur any liability by reason of the taking of such steps. 8.8 Enforcement by Secured Parties ------------------------------ No Secured Party shall have any right to institute any action or proceeding or to exercise any other remedy authorized by this Collateral Trust Agreement or by law or by equity for the purpose of realizing on the Senior Lien or the Junior Lien, or by reason of jeopardy of security, or for the execution of any trust or power hereunder, unless the required Enforcement Order or Enforcement Direction and indemnity referred to in subsection 12.2(2) shall have been ------------------ tendered to the Trustee and the Trustee shall have failed to act within 60 days thereafter; in such case but not otherwise, any Senior Secured Party (but no Class D Secured Party) acting on behalf of itself and all other Senior Secured Parties shall be entitled to take proceedings in any court of competent jurisdiction such as the Trustee might have taken under this Article, but in no event shall any such Senior Secured Party or combination of such Senior Secured Parties have any right to exercise the power of sale conferred hereby on the Trustee or to appoint a Receiver or to exercise or take any other remedy or proceedings out of court for the purpose of realizing on the Senior Lien; it being understood and intended that no one or more Secured Parties shall have any right in any manner whatsoever to enforce any Lien hereunder with respect to the Collateral or to take any action with respect to the Collateral by virtue of its rights hereunder, or to enforce any right hereunder except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the Trustee, except only as herein provided, and in any event for the benefit of all Senior Secured Parties, prior to the Senior Secured Indebtedness Termination, and thereafter for the benefit of the Class D Secured Parties. Nothing in this Collateral Trust Agreement shall be construed as a waiver, impairment or other limitation by any Secured Party of any rights it may have as a creditor in a case under the United States Bankruptcy Code, the Canadian Bankruptcy and Insolvency Act or the Canadian Companies' Creditors Arrangement Act, in each case as amended from time to time or any other laws of any jurisdiction relating to bankruptcy, insolvency, arrangement or reorganization (collectively "Insolvency Laws") other than as expressly provided herein, --------------- including, without limitation, its rights to assert claims in any proceeding under any Insolvency Law or to propose, negotiate, accept or withhold its acceptance from, vote for or against, or otherwise consent or not consent to, any plan of reorganization, arrangement, liquidation, or other scheme for distribution to creditors. 51 8.9 Senior Secured Party as Purchaser --------------------------------- Upon any sale of the Collateral or any part thereof, whether made under the power of sale herein contained or pursuant to foreclosure or other judicial proceedings, the Trustee or any one or more of the Senior Secured Parties or any agent or representative thereof may become purchasers. Following the Senior Secured Indebtedness Termination, the Class D Secured Parties or any agent or representative thereof may become purchasers. 8.10 Application of Proceeds of Realization of Security -------------------------------------------------- Except as otherwise provided herein or by law or by the order of a court, the moneys arising from the enforcement of any remedy provided for herein, including, without limitation, the carrying on of the Business and the sale or other realization of the whole or any part of the Collateral, whether under any sale by the Trustee or by judicial process or otherwise, shall be held by the Trustee and, together with any other moneys then or thereafter in the hands of the Trustee available for the purpose, shall be applied by the Trustee as follows: First: To the Trustee in such capacity, an amount equal to its costs, fees, expenses or indemnities in connection with its actions under the Collateral Documents; Second: To the Secured Party Representatives for Senior Secured Indebtedness in an amount equal to any payments made under Section 12.2(2) --------------- as of the date of such distribution; Third: To the Enforcement Representatives in an amount equal to unreimbursed expenses and costs of the Enforcement Representatives for which the Pledgors are obligated under Section 11.7(9) as of the date of --------------- such distribution; Fourth: To the Secured Party Representatives on behalf of each Holder they represent, respectively, in an amount equal to the Senior Secured Indebtedness owing to each such Holder as of the date of such distribution, and to the Trustee, to be retained as Collateral, in an amount equal to undrawn amounts of letters of credit or other contingent obligations the reimbursement obligations for which when incurred would constitute Senior Secured Indebtedness under the Financing Agreements relating to Senior Secured Indebtedness; provided that in the event such reimbursement -------- obligations become owing to the Holder thereof, the Trustee shall pay the related Secured Party Representative the amount of cash held as Collateral therefor pursuant to this clause; and provided, further, that to the extent -------- ------- any such letters of credit or other contingent obligations shall expire or terminate undrawn or unrealized the amount of cash held as Collateral therefor pursuant to this clause in respect of such reimbursement obligations or other contingent obligations shall be applied in accordance with the order of priority set out in this Section; 52 Fifth: If the Senior Secured Indebtedness Termination has occurred, to the Secured Party Representatives on behalf of themselves and each Holder they represent, respectively, in an amount equal to the Class D Secured Indebtedness owing to each such Person as of the date of such distribution; and Sixth: If the Senior Secured Indebtedness Termination has occurred, to the extent of any surplus (but only after payment in full of all Secured Indebtedness, direct or contingent, and whether or not then due and payable), if any, to the Pledgors, except as may be provided otherwise by law, it being understood that the Pledgors shall remain liable to the extent of any - ------------------- deficiency between the amount of the proceeds of the Collateral and the aggregate of the sums referred to in clauses first through fourth of this ------- ----- ------ Section. During the pendency of any legal proceeding to determine whether any claim of any Person is "Secured Indebtedness" hereunder, the Trustee shall -------------------- segregate any funds allocable to the Person whose claim is the subject of such proceeding and hold such segregated funds until the matter has been resolved by a final, nonappealable order of a court of competent jurisdiction. In the event that funds to be distributed by the Trustee pursuant to clause ------ second, third, fourth or fifth of this Section shall be insufficient to pay in - ------ ----- ------ ----- full the Secured Indebtedness referred to therein, distributions made pursuant to any such clause shall be made pro rata based on the aggregate amount of --- ---- unpaid Secured Indebtedness held by each Person referred to in such clause without regard as to characterization as principal, premium, interest, reimbursement obligations, fees or otherwise. In no event shall any distribution be made in respect of any Class D Secured Indebtedness prior to the Senior Secured Indebtedness Termination. Prior to distribution of any funds to any Secured Party Representative, the Trustee may request a certificate from such Secured Party Representative as to the amounts of Secured Indebtedness of the types described in clauses second, ------- ------ third, fourth and fifth owing to such Secured Party Representative and the - ----- ------ ----- Holders (if any) it represents. The Trustee may conclusively rely on any such certificate received by it in making any distributions pursuant hereto. In the event that the amount of any distribution pursuant to clause fourth ------ ------ of this Section, when aggregated with all prior distributions under such clause, is less than the total amount of all Senior Secured Indebtedness as to which distributions are to be made under such clause, any Secured Party Representative may, to the extent any related Holder is owed Senior Secured Indebtedness and has issued letters of credit that remain undrawn at the time of any distribution or other contingent obligations not yet absolute, elect that distributions pursuant to such clause be applied between (x) such Senior Secured Indebtedness and (y) as Collateral for undrawn letters of credit or other contingent obligations as such Secured Party Representative shall elect in a certificate from such Secured Party Representative to the 53 Trustee (it being understood that in the absence of any such election, distributions shall be made ratably). Until the Trustee shall have distributed cash held by it pursuant hereto, the Trustee may invest such cash in Temporary Cash Investments at the written direction of the Enforcement Committee, and the income from such Temporary Cash Investments shall be retained by the Trustee as Collateral. The Trustee shall have no liability or responsibility for any loss, including loss of principal, in connection with any investment of such cash in Temporary Cash Investments made in accordance with any Enforcement Direction. 8.11 Trustee Appointed Attorney -------------------------- Effective only upon the occurrence and during the continuation of an Enforcement Event, each Pledgor hereby irrevocably appoints the Trustee to be the true and lawful attorney of such Pledgor in the name of and on behalf of such Pledgor in connection with any realization proceedings upon the Collateral to demand, sue for, collect, compromise, compound, receive, give receipt for and grant releases for any and all sums owing which now or may hereafter constitute part of the Collateral and to execute and do and take all proceedings and actions as the Trustee may deem necessary or desirable in order to realize upon the Collateral and to affix the corporate seal of such Pledgor on any deeds, transfers, conveyances, assignments or other documents and, without limitation, to execute and do any deeds, transfers, conveyances, assignments (including an assignment into bankruptcy), assurances, or things which such Pledgor ought to execute and do, and has refused upon request so to do, under the covenants and provisions contained herein and generally to use the name of such Pledgor in exercise of all or any powers hereby conferred on the Trustee with full powers of substitution and revocation. Such power of attorney being coupled with an interest shall not be revoked by the insolvency, bankruptcy, dissolution or other legal incapacity of such Pledgor and may be exercised at any time subsequent to any such event. 8.12 Distribution of Proceeds ------------------------ Payments to the Secured Party Representatives pursuant to Section 8.10 ------------ shall be made as follows: (1) payment of Secured Indebtedness shall be made to the relevant Secured Party Representative therefor and a receipt for such payment shall be obtained from such Secured Party Representative therefor; but the Trustee may dispense with presentation and surrender or endorsement upon such indemnity being given as it shall deem sufficient; (2) from and after the date of payment to the related Secured Party Representative, interest shall accrue only on the amount of the related Secured Indebtedness still owing; and 54 (3) the Trustee shall not be required to make any interim payment to pay any Secured Party Representative unless the monies in its hands, after reserving therefrom such amount as the Trustee may think necessary to provide for payments mentioned in clauses first, second and third of ------- ----- ------ ----- Section 8.10, exceed 1% of the principal amount of the Secured ------------ Indebtedness. 8.13 Persons Dealing with the Trustee -------------------------------- No Person dealing with the Trustee or any Receiver appointed pursuant hereto or any agents thereof shall be concerned to enquire whether the Senior Lien or Junior Lien has become enforceable or whether the powers which the Trustee is purporting to exercise have become exercisable, or whether any moneys remain due upon the security of this Collateral Trust Agreement or as to the necessity or expediency of the stipulations and conditions subject to which any sale shall be made or otherwise as to the propriety or regularity of any sale or of any other dealing by the Trustee with the Collateral or any part thereof, or to see to the application of any moneys paid to the Trustee and, in the absence of fraud on the part of such Person, such dealing shall be deemed so far as regards the safety and protection of such Person, to be within the powers hereby conferred and to be valid and effective accordingly. 8.14 Exercise of Powers by the Trustee --------------------------------- In the exercise of any powers conferred by this Article, the Trustee shall act in good faith and in a prudent and commercially reasonable manner. ARTICLE IX SUPPLEMENTS, AMENDMENTS AND SUCCESSOR PLEDGORS 9.1 Provision for Supplements for Certain Purposes; Amendments ---------------------------------------------------------- (1) From time to time the Pledgors and the Trustee shall, when so directed pursuant to this Collateral Trust Agreement, execute and deliver by their respective proper officers, deeds or instruments supplemental hereto, which thereafter shall form part hereof, for any one or more or all of the following purposes: (a) granting, transferring, assigning, pledging or charging to or in favor of the Trustee, or creating and granting a security interest to or in favor of the Trustee in, any property or assets now owned or hereafter acquired by any Pledgor; (b) giving effect to any Secured Parties' Order received by the Trustee; 55 (c) evidencing the succession of successor companies to any Pledgor and the covenants of and obligations assumed by such successor companies in accordance with the provisions of Section 9.2; ----------- (d) adding to the limitations or restrictions herein, further limitations or restrictions, thereafter to be observed, upon the dealing with the Collateral, and adding to the covenants of the Pledgors herein contained for the protection of the Secured Parties, provided that the Trustee (which -------- may rely on the advice of Counsel) shall be of the opinion that such further limitations, restrictions or covenants shall not be prejudicial to the interests of the Secured Parties and the Trustee; and (e) for any other purposes not inconsistent with the terms of this Collateral Trust Agreement, including the correction or rectification of any ambiguities, defective provisions, errors or omissions herein, provided -------- that in the opinion of the Trustee (which may rely on the advice of Counsel) the rights of the Trustee and the Secured Parties are not prejudiced thereby. The Trustee at the expense of the Companies shall promptly furnish copies of any such deeds or instruments executed pursuant to this subsection (1) to -------------- each Secured Party Representative. (2) Subject to subsections (3) and (4) of this Section, this Collateral Trust --------------- --- Agreement may from time to time be amended by the execution and delivery of one or more amendments hereto by the Trustee and the Pledgors, as the Trustee and the Pledgors may agree from time to time, provided that the Trustee shall have -------- received a Class A Secured Parties' Resolution and a Class B Secured Parties' Resolution approving such amendments. (3) Without limiting any rights of any Senior Secured Parties under this Collateral Trust Agreement to direct enforcement of the Senior Lien or to approve partial or total releases of the Collateral, no amendment may be made to this Collateral Trust Agreement which would cause any Class D Secured Indebtedness to be unsecured hereby with respect to any Collateral when outstanding Senior Secured Indebtedness remains secured hereby with respect to such Collateral without the consent of the Secured Party Representatives for such Class D Secured Indebtedness, and no amendment may be made to Section 11.15 ------------- without the consent of the Secured Party Representatives for all Class D Secured Indebtedness. In addition, no amendment to this Collateral Trust Agreement may create a new Class of Secured Indebtedness which is expressly subordinate to the Senior Secured Indebtedness but senior to the Class D Secured Indebtedness without the consent of the Secured Party Representative for such Class D Secured Indebtedness. (4) No amendment may be made to this Collateral Trust Agreement unless the Trustee receives an Officers' Certificate of each of the Companies certifying that the consent of the Secured Party Representatives of Class C Secured Indebtedness is not required for such 56 amendment under the related Financing Agreements or, if such consent is so required, such consent has been obtained, and an opinion of Counsel to such effect which is satisfactory in form and substance to the Trustee. 9.2 Successor Pledgors ------------------ No Pledgor shall enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other Person (the "Successor Pledgor") whether by way of reconstruction, ----------------- reorganization, consolidation, amalgamation, winding-up, merger, transfer, sale or otherwise, except in compliance with each of the Financing Agreements in which case a Successor Pledgor of a Pledgor resulting from such transaction shall possess and from time to time may exercise or perform each and every right, power and obligation of such Pledgor under this Collateral Trust Agreement and any other Collateral Documents delivered by such Pledgor in the name of such Pledgor or otherwise and any act or proceeding by any provision of this Collateral Trust Agreement required to be done or performed by the Directors or officers of such Pledgor may be done and performed with like force and effect by the Directors or officers of such Successor Pledgor. ARTICLE X SECURED PARTIES' ORDERS, SECURED PARTIES' CLASS RESOLUTIONS AND ENFORCEMENT ORDERS 10.1 Powers of Secured Parties ------------------------- (1) Unless and until an Enforcement Order has been given and has not been waived, the Secured Parties shall have the following powers exercisable from time to time by a Secured Parties' Order: (a) subject to subsection 12.2(2), power to require the Trustee to refrain from ------------------ exercising any of the powers hereby conferred upon the Trustee or to direct the Trustee to waive the enforcement thereof on such terms as may be deemed advisable or to cancel any declaration or waiver (except as otherwise provided in Section 8.7(2)) previously made by the Trustee hereunder; -------------- (b) subject to compliance with Article IX, power to sanction any change ---------- whatsoever of any provision of this Collateral Trust Agreement to which the Pledgors may have agreed and any modification, alteration, abrogation, compromise or arrangement of or in respect of the rights of the Secured Parties against the Pledgors to which the Pledgors may have agreed, whether such rights shall arise under the provisions of this Collateral Trust Agreement or otherwise (other than in respect of Articles VIII, IX, X, and ------------- -- - XI); -- 57 (c) power to assent to any judgment by any Pledgor or compromise or arrangement with any creditor, creditors or class or classes of creditors or with the holders of any shares or securities of the Pledgors; (d) subject to Section 9.1(3) and subsection 12.2(2), power to assent to any -------------- ------------------ modification of or change in or addition to or deletion from the provisions contained in this Collateral Trust Agreement (other than in respect of Articles VIII, IX, X, and XI) or any instrument ancillary or supplementary ------------- -- - -- hereto or any agreement forming part of the Collateral which shall be agreed to by the Pledgors and to authorize the Trustee to concur in and execute any indenture supplemental to this Collateral Trust Agreement or any agreement supplemental to any instrument embodying any such modification, change, addition or deletion, or to concur in and execute any deeds, documents, or writings; or (e) subject to Section 9.1(3), power to sanction the release of any part of the -------------- Collateral from the Senior Lien and the Junior Lien in addition to the release of the whole of the Collateral pursuant to and in accordance with Section 3.5 or 3.7 or the whole or part of the Collateral pursuant to and ----------- --- in accordance with Section 4.4. ----------- (2) The Secured Parties shall have the following powers exercisable from time to time by a Secured Parties' Order: (a) power to remove the Trustee from office and to appoint a new Trustee; or (b) power to sanction any change to Article VIII, IX, X or XI, subject to ------------ -- - -- Section 9.1(3). -------------- (3) The foregoing powers shall be deemed to be several and cumulative and not dependent on each other and the exercise of any one or more of such powers, or any combination of such powers, from time to time, shall not be deemed to exhaust the rights of the Senior Secured Parties to exercise such power or powers, or combination of powers, thereafter from time to time. 10.2 Release Order ------------- In addition to any releases permitted under Section 3.7 or 10.1 or Article ----------- ---- ------- IV hereof, upon receipt by the Trustee of a Release Order and upon receipt by - -- the Trustee of an Officers' Certificate of each of the Companies pursuant to and in full compliance with the terms and provisions of subsection 3.5(2), the ----------------- Trustee shall, subject to subsection 12.2(2), give effect to such Release Order. ------------------ 58 10.3 Notice By Trustee ----------------- Upon the receipt by the Trustee of any Secured Parties' Class Resolution, Secured Parties' Order, Release Order or Enforcement Order, the Trustee shall forthwith give notice thereof to all Secured Party Representatives and to the Pledgors. 10.4 Binding Effect of Secured Parties' Class Resolutions, Secured Parties' ---------------------------------------------------------------------- Orders, Release Orders and Enforcement Orders --------------------------------------------- (1) Every Secured Parties' Class Resolution shall be binding upon all the Secured Parties of such Class, whether signatories thereto or not, and each and every Secured Party and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to each such resolution properly effected in accordance with the terms hereof. (2) Every Secured Parties' Order shall be binding upon all the Secured Parties, whether signatories thereto or not, and each and every Secured Party and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to each such resolution properly effected in accordance with the terms hereof. (3) Every Release Order and Enforcement Order shall be binding upon all Secured Parties, whether signatories thereto or not, and each and every Secured Party and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to each such order properly effected in accordance with the terms hereof. (4) A Secured Party Representative is not required to vote all of the Secured Indebtedness it represents in the same way on any matter and may vote differently with respect to different portions of the Secured Indebtedness it represents on the same matter. 10.5 Evidence of Rights of Holders ----------------------------- (1) Any request, direction, notice, consent or other instrument which this Collateral Trust Agreement may require or permit to be signed or executed by the Secured Party Representatives may be signed in counterparts thereof and shall be signed and executed by the related Secured Party Representatives. (2) For the purposes of any request, direction or consent hereunder, the Trustee may deem and treat the registered Secured Party Representative as the owner of the Secured Indebtedness it represents without production of any related Financing Agreement or any other instrument of verification. 59 ARTICLE XI ENFORCEMENT COMMITTEE 11.1 Enforcement Committee To Direct Trustee's Actions ------------------------------------------------- The Senior Secured Parties shall appoint an enforcement committee (the "Enforcement Committee") in accordance with the provisions of this Article upon - ---------------------- the occurrence of an Enforcement Event and receipt by the Trustee from a Class of Senior Secured Indebtedness of an Enforcement Order which has not been waived in accordance with subsection 8.7(1). The Enforcement Committee so appointed ----------------- shall have the power to direct and authorize the actions to be taken by the Trustee with respect to realization of the Senior Lien and the Junior Lien and the enforcement of its rights hereunder by Enforcement Directions to the Trustee from time to time. 11.2 Notice of Enforcement Order to Secured Parties ---------------------------------------------- (1) No later than the second Business Day following the date (the "Enforcement ----------- Notice Date") on which the Trustee receives an Enforcement Order, the Trustee - ----------- shall give written notice of such Enforcement Order to each Secured Party Representative and shall deliver to each of the Companies a written request that the Companies deliver to the Trustee a Statement of Senior Secured Indebtedness which is Outstanding as of the Enforcement Notice Date. The Trustee shall also deliver a request to each Secured Party Representative for the Senior Secured Indebtedness requesting such Secured Party Representative to notify the Trustee in writing within one Business Day of the Outstanding amount of the Senior Secured Indebtedness of such Secured Party Representative and the Holders, if any, which it represents (and the related unexpired and unterminated commitment amounts, if any). If such Senior Secured Indebtedness is not denominated in U.S. Dollars, the Trustee will calculate the U.S. Dollar Equivalent Amount thereof, which calculation shall be conclusive and binding absent manifest error. (2) Immediately upon receipt of such request but in any event no later than the third Business Day following the Enforcement Notice Date, the Companies shall deliver to the Trustee a Statement of Senior Secured Indebtedness which is Outstanding. The Trustee shall determine the total Outstanding amount of the Class A Secured Indebtedness, the Class B Secured Indebtedness and the Class C Secured Indebtedness based on the information set out in such Statement of Senior Secured Indebtedness in its possession and any notices received by the Trustee from any Secured Party Representatives pursuant to subsection (1) above -------------- as at the close of business (New York time) on such third Business Day following the Enforcement Notice Date. Except as hereinafter provided, the Trustee shall be entitled to rely on the accuracy of the information set out in such Statement of Senior Secured Indebtedness and shall use such information for the sole and exclusive purpose of determining the size and composition of the Enforcement Committee as provided in Section 11.4 and Section 11.5. ------------ ------------ Failure by the Companies to deliver a Statement of Senior Secured Indebtedness or of any 60 Secured Indebtedness or of any Secured Party Representative to deliver the notice of Senior Secured Indebtedness pursuant to subsection (1) above or any -------------- inaccuracies in such Statement of Senior Secured Indebtedness or notices shall not affect any rights of the Senior Secured Parties in respect of the size and composition of the Enforcement Committee, and the size and composition of the Enforcement Committee will be revised if such failures and inaccuracies are corrected. The Trustee or any Senior Secured Party shall be entitled at any time to verify and correct the information in such Statement of Senior Secured Indebtedness or other notice pertaining to such Senior Secured Party and any Secured Party Representative for Senior Secured Indebtedness shall be entitled to advise the Trustee in writing of the Outstanding amount of such Senior Secured Party's Senior Secured Indebtedness as of the Enforcement Notice Date, and the Trustee shall be entitled to conclusively rely on the written information so provided by such Secured Party Representative for Senior Secured Indebtedness in place of the relevant information in such Statement of Senior Secured Indebtedness provided by the Companies or previously provided by or on behalf of such Senior Secured Party. (3) No later than the fourth Business Day following the Enforcement Notice Date, the Trustee shall give written notice (the "Appointment Request") to all ------------------- Secured Party Representatives for the Senior Secured Indebtedness of: (a) the size and composition of the Enforcement Committee and the number of Enforcement Representatives that each Class of Senior Secured Parties shall be entitled to appoint and the number of votes such Enforcement Representatives shall have, all determined in accordance with Section 11.4; ------------ (b) its request for appointment of Enforcement Representatives; and (c) the date (which shall not be a date later than the tenth Business Day following the Enforcement Notice Date), time and place of the initial meeting of the Enforcement Committee. 11.3 Enforcement Representatives --------------------------- (1) No later than the date and time specified in the Appointment Request for the initial meeting of the Enforcement Committee, each Class of Senior Secured Parties shall, in the manner set forth in Section 11.5, appoint its Enforcement ------------ Representative(s) as set out in the Appointment Request. Such notice shall set out or be accompanied by the name, address, telephone number and facsimile number (if any) and specimen signature of each Enforcement Representative and, subject to Section 11.5 in the case of Enforcement Representatives of the Class ------------ A Secured Parties, the number of votes allocated to such Enforcement Representative, but the failure to set out the address, telephone number, facsimile number or specimen signature of any Enforcement Representative shall not affect the validity of the appointment of the Enforcement Representative appointed thereby. 61 (2) If any Class of Senior Secured Parties shall fail to appoint Enforcement Representatives in accordance with subsection (1), the Trustee shall appoint -------------- Enforcement Representatives for such Class by selecting and appointing from among those Senior Secured Parties of such Class with the highest amount of Outstanding Senior Secured Indebtedness as of the Enforcement Notice Date representatives to serve as such Enforcement Representatives. The Trustee shall provide notice of such appointment immediately to all Secured Party Representatives of Senior Secured Indebtedness. (3) At any time and from time to time, any Class of Senior Secured Parties may, in the manner set forth in Section 11.5, replace any of its Enforcement ------------ Representative(s) and any Enforcement Representative so replaced shall cease to be an Enforcement Representative upon receipt by the Trustee of any such Secured Parties' Class Resolution. No Enforcement Representative shall be entitled to resign from the Enforcement Committee unless he shall have tendered his resignation in writing to the Trustee. Such resignation shall take effect upon the earlier of (A) the appointment of his replacement pursuant to this subsection, and (B) 30 days after the date on which the Trustee receives notice of such resignation. If any Enforcement Representative tenders his resignation to the Trustee, the Trustee shall give written notice thereof to the Secured Party Representative of the Class of Senior Secured Parties who appointed such Enforcement Representative. As soon as practicable upon receipt of such notice, the applicable Class of Senior Secured Parties shall appoint a replacement for the resigning Enforcement Representative. (4) Any Enforcement Representative may from time to time appoint an alternate to act in his place and stead on the Enforcement Committee, provided that such Enforcement Representative advises the Trustee of such appointment, and any such alternate so appointed shall have the full power of such Enforcement Representative in the latter's absence. 11.4 Enforcement Committee --------------------- Each Class of Senior Secured Indebtedness shall be entitled to (1) appoint Enforcement Representatives and (2) receive the number of votes on the Enforcement Committee, in each case equal to the number which results (rounding up to the next higher integer) from dividing (i) the aggregate U.S. Dollar Equivalent amount of the Outstanding Senior Secured Indebtedness of such Class as of the Enforcement Notice Date, by (ii) U.S. $50,000,000. Each Class of Senior Secured Indebtedness may allocate one or more votes to each Enforcement Representative appointed by it, but the aggregate number of votes to which such Class Enforcement Representatives are entitled shall not exceed the number calculated pursuant to the preceding sentence. Each Class of Senior Secured Indebtedness shall in the manner set forth in Section 11.5 designate with each ------------ appointment of an Enforcement Representative for such Class the number of votes (not less than one) which shall be allocated to such Enforcement Representative. Any Class may appoint any number of Enforcement Representatives which equals or exceeds one but is less than the maximum number set forth in the first sentence of this Section. 62 11.5 Appointment of Enforcement Representatives ------------------------------------------ The Classes of Senior Secured Indebtedness will appoint and replace their respective Enforcement Representatives, and will designate the number of votes on the Enforcement Committee which will be allocated to each of their respective Enforcement Representatives, in the following manner: (1) The aggregate number of votes on the Enforcement Committee which shall be allocated to all Enforcement Representatives of each Class of Senior Secured Indebtedness shall be determined as set forth in Section 11.4. ------------ (2) The Class B Secured Parties and the Class C Secured Parties shall appoint and replace the Enforcement Representatives of their respective Classes, and will designate the number of votes on the Enforcement Committee which will be allocated to each of their respective Enforcement Representatives, by delivery to the Trustee of Secured Parties' Class Resolutions of their respective Classes making such appointments, replacements and designations. (3) The Class A Secured Parties shall appoint and replace their Enforcement Representatives, and designate the number of votes on the Enforcement Committee which will be allocated to each of such Enforcement Representatives, as follows: (i) All Class A Secured Parties are and will be divided into groups for the purpose of such appointment, replacement and designation (each an "Appointing Group"). The initial Appointing Groups are (A) the 1996 Agent ---------------- and 1996 Lenders, (B) the MEIP Agent and MEIP Banks, (C) RBC and (D) the Dresdner Banks. Additional Secured Parties holding Class A Secured Indebtedness shall be designated as additional Appointing Groups in the Additional Secured Indebtedness Registration Statements pursuant to which such Additional Secured Parties become Class A Secured Parties. (ii) Any two or more Appointing Groups may combine into a single Appointing Group for purposes of appointing or replacing the Enforcement Representatives of such combined Appointing Group. Any such combination shall only be effective upon delivery of a written notice thereof to the Trustee and the Secured Party Representatives of all other Appointing Groups, signed by the Secured Party Representatives of each of the combining Appointing Groups. (iii) Each Appointing Group shall be entitled to appoint and replace Enforcement Representatives having an aggregate number of votes on the Enforcement Committee at any time calculated as provided in this clause ------ (iii). ----- 63 (A) The Trustee will calculate the number which results (rounding down to the next lower integer, which may be zero) from dividing (x) the aggregate Outstanding U.S. Dollar Equivalent amount of Class A Senior Secured Indebtedness of such Appointing Group by (y) U.S. $50,000,000. Such Appointing Group will be allocated a number of votes equal to such next lower integer. (B) After each Appointing Group has been allocated its number of votes pursuant to clause (A), the Trustee will calculate the remaining ---------- number of votes on the Enforcement Committee which are allocable to the Class A Secured Parties (the "Remaining Votes"), equal to the excess of (x) the number of votes which are allocable to all the Class A Secured Parties pursuant to Section 11.4 over (y) the aggregate of ------------ all votes on the Enforcement Committee which have been allocated to all Appointing Groups pursuant to clause (A). ---------- (C) The Remaining Votes shall be allocated among those Appointing Groups which have been allocated at least one vote on the Enforcement Committee pursuant to clause (A) ratably so that each such ---------- Appointing Group is allocated additional votes (or fractions of votes) in an amount equal to a fraction, the numerator of which is the product of (x) such Appointing Group's votes as allocated pursuant to clause (A) times (y) the number of Remaining Votes calculated pursuant ---------- ----- to clause (B), and the denominator of which is the aggregate number of ---------- all votes allocated to all Appointing Groups pursuant to clause (A). ---------- (D) The aggregate number of votes on the Enforcement Committee which will be allocated to each Appointing Group shall be equal to the sum of (x) the aggregate number of votes which were allocated to such Appointing Group pursuant to clause (A), plus (y) the additional votes ---------- ---- (or fractions of votes) which are allocated to such Appointing Group pursuant to clause (C) above. ---------- (iv) Each Appointing Group may appoint one Enforcement Representative for each full vote allocated to such Appointing Group, but may appoint fewer Enforcement Representatives if it so determines. Such appointment must be made by written notice to the Trustee, signed by each Secured Party Representative of such Appointing Group in accordance with Section 11.3. Any Enforcement Representative of any Appointing ------------ Group may be replaced by a written notice to the Trustee signed by each Secured Party Representative of such Appointing Group. (v) Those Enforcement Representatives of each Appointing Group who are present at any meeting of the Enforcement Committee may together exercise all votes (including fractional votes) allocated to such Appointing Group. All Enforcement Representatives of each Appointing Group shall be required to vote all the votes 64 allocable to such Appointing Group in the same way with respect to any matter which is voted upon by the Enforcement Committee, unless the Trustee shall have received a written notice signed by each Secured Party Representative of such Appointing Group designating a specific number of votes (and fractions thereof, but not less than one vote) which are allocated to each such Enforcement Representative. If the Trustee has received such a written notice, each such Enforcement Representative shall be entitled to exercise only that number of votes designated in such notice. 11.6 One Enforcement Committee To Be Constituted at Any Time ------------------------------------------------------- So long as an Enforcement Committee has been appointed under Section 11.1 ------------ pursuant to the receipt by the Trustee of an Enforcement Order which has not been waived, no additional Enforcement Committee shall be constituted hereunder in consequence of the receipt of any additional Enforcement Order, it being understood that there shall be only one Enforcement Committee constituted at any time. 11.7 Convening and Conduct of Meetings of the Enforcement Committee -------------------------------------------------------------- Meetings of the Enforcement Committee shall be convened, held and conducted in the following manner: (1) At any time and from time to time the Trustee or the Companies may, and the Trustee shall (subject to Section 12.2) on receiving a written request of ------------ any Enforcement Representative, convene a meeting of the Enforcement Committee. In the event of the Trustee failing to convene a meeting after being so requested by an Enforcement Representative, such Enforcement Representative may convene such meeting. Every such meeting shall be held in New York City or at such other location designated by the Trustee. (2) At least three Business Days' prior written notice of such meeting shall be given to the Enforcement Representatives and such notice shall state the time when and the place where said meeting is to be held and shall specify in general terms the nature of the business to be transacted thereat, but it shall not be necessary to specify in the notice the text of the resolutions to be passed. No notice of a meeting is necessary if all Enforcement Representatives are in attendance thereat and do not object to the lack of notice or if all Enforcement Representatives waive notice of such meeting, and such waiver may be given before or after such meeting. Notices shall be given in the manner set forth in Section 11.14 and a copy ------------- thereof shall be delivered to the Trustee, unless the meeting has been called by it. It shall not be necessary to specify in the notice of any adjournment of a meeting the nature of the business to be transacted at the adjourned meeting. The accidental omission to give such notice to or the non-receipt of any such notice by any Enforcement Representative shall not invalidate any resolution passed at such meeting provided that a quorum is present at such meeting. 65 (3) The Trustee shall be entitled to have one of its representatives present at every meeting of the Enforcement Committee who shall act as secretary of each such meeting. Such representative shall have no vote as such. The Enforcement Representatives present at a meeting of the Enforcement Committee may from time to time request that the representative of the Trustee present at such meeting withdraw from such meeting during the discussion of particular business and such representative of the Trustee shall comply with each such request. (4) At any meeting of the Enforcement Committee a quorum shall consist of Enforcement Representatives having a majority of the votes of all Enforcement Representatives. In the event of such quorum not being present on the date for which the meeting is called within 30 minutes after the time fixed for the holding of such meeting, then the meeting shall be adjourned to a date no later than two Business Days following the date of the original meeting and the Trustee shall give notice to all Enforcement Representatives of the date and time to which such meeting is adjourned and of the place where such adjourned meeting is to be held and at such adjourned meeting a quorum shall consist of Enforcement Representatives having a majority of the votes of all Enforcement Representatives. Any business may be brought before or dealt with at the adjourned meeting that could have been dealt with at the original meeting. (5) The Enforcement Representatives present at any meeting shall choose some person present who shall be an Enforcement Representative to be chairman of such meeting. The chairman of any meeting at which a quorum of the Enforcement Representatives is present may, with the consent of the majority of the Enforcement Representatives present at 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. (6) Every question submitted to a meeting and every resolution to be voted on, shall be decided or passed by more than 50% of the votes given and the decision of such votes shall be deemed to be the decision of the Enforcement Committee of the meeting at which such vote was taken. (7) At any meeting of the Enforcement Committee, each Enforcement Representative present thereat in person shall have one or more votes as specified in such Enforcement Representative's appointment or as provided in Section 11.5. Votes shall only be given in person (including by ------------ telephone, electronic or other facilities as permitted by Section 11.8). ------------ (8) Counsel for the Trustee, the representatives of either of the Companies, Counsel, and/or counsel for the Senior Secured Parties may attend any meeting of the Enforcement Committee with the consent of the Enforcement Committee but shall have no vote as such. Failure by any of the foregoing Persons to attend such meeting shall have no effect whatsoever on the meeting or on the matters resolved at such meeting. 66 (9) All reasonable expenses and costs incurred by the Enforcement Representatives in connection with the performance of their duties as Enforcement Representatives serving on the Enforcement Committee, including the reasonable expenses associated with the attendance of the Enforcement Committee meetings, shall be borne by the Companies and shall be secured hereunder by the Senior Lien. 11.8 Meetings by Telephone --------------------- Notwithstanding anything herein contained, a meeting of the Enforcement Committee may (and shall at the request of any person entitled to attend) be held by means of such telephone, electronic or other communication facilities or any combination thereof which permit all persons participating in the meeting to communicate effectively with each other simultaneously and instantaneously and an Enforcement Representative participating in such a meeting by such means is deemed for the purposes hereof to be present at that meeting. The provisions of Section 11.7 with respect to convening meetings, notice, quorum, appointment of - ------------ a chairman of the meeting, adjournment of meetings, voting, and attendance at meetings by the Trustee, counsel for the Trustee, the Companies, Counsel, and/or counsel for the Senior Secured Parties, shall apply mutatis mutandis to all such meetings held by telephone, electronic or other communication facilities or any combination thereof. 11.9 Declaration by Chairman of Result of Vote ----------------------------------------- Subject to subsection 11.7(6), at any meeting of the Enforcement Committee, ------------------ a declaration made by the chairman that a resolution has been carried, or carried by any particular majority of votes, or lost, shall be conclusive evidence thereof. 11.10 Minutes ------- Minutes of all resolutions and proceedings at every such meeting shall be made and duly entered in books to be provided from time to time for that purpose by the Trustee at the expense of the Companies and any such minutes, if signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Enforcement Committee, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes shall have been made shall be deemed to have been duly held and convened and all resolutions passed or proceedings had thereat to have been duly passed and had. 11.11 Binding Effect of Resolutions ----------------------------- Every resolution passed in accordance with the provisions of this Article at a meeting of the Enforcement Committee shall be binding upon all Enforcement Representatives, whether present at or absent from such meeting, and upon all Secured Parties, and every 67 instrument in writing signed by the Enforcement Representatives shall be binding upon all the Enforcement Representatives, whether signatories thereto or not, and upon all Secured Parties, and each and every Secured Party and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to each such resolution and instrument in writing. 11.12 Enforcement Directions ---------------------- (1) The Enforcement Committee shall, through the delivery to the Trustee of one or more resolutions passed in accordance with this Article, direct and authorize the actions to be taken by the Trustee with respect to the realization of the Senior Lien and the Junior Lien and the enforcement of any or all of its rights hereunder, and any such resolution shall upon delivery to the Trustee constitute an "Enforcement Direction". --------------------- (2) The Enforcement Committee may by Enforcement Direction instruct the Trustee to proceed with the realization of the Senior Lien and the Junior Lien and to enforce its rights hereunder in such manner as the Enforcement Committee shall determine. (3) If an Enforcement Direction instructs the Trustee to proceed to realize upon the Senior Lien and the Junior Lien and to enforce its rights hereunder by one or more of the remedies set out in Section 8.3, such ----------- Enforcement Direction shall also be deemed to have also instructed the Trustee not to proceed at such time by any of the other remedies set out in Section 8.3. ----------- 11.13 Failure of Enforcement Committee to Provide Directions ------------------------------------------------------ If the Enforcement Committee at any time advises the Trustee that it is unable to provide the Trustee with instructions by Enforcement Direction(s) or if the Trustee at any time, acting reasonably, determines that the Enforcement Committee has failed to provide it with instructions by Enforcement Direction(s), the Trustee may make an application to a judge of either the Supreme Court of the State of New York sitting in the Borough of Manhattan, New York City or the U.S. District Court for the Southern District of New York for directions. If, as a result of making such application, the court fails or refuses to provide the Trustee with directions or fails to confirm or approve any action or proposed action of the Trustee, the Trustee shall apply to a judge of either the Supreme Court of the State of New York sitting in the Borough of Manhattan, New York City or the U.S. District Court for the Southern District of New York for a court appointed Receiver. 68 11.14 Notices Under This Article -------------------------- (1) Any notice or request required to be given by the Trustee under this Article shall be given by facsimile transmission of such notice or request to the recipient provided that if the Trustee shall not have a facsimile number for such recipient, such notice shall be given by the Trustee in the most expeditious manner as the Trustee shall determine. (2) Any notice or statement required to be given by a Person to the Trustee under this Article shall be given by facsimile transmission of such notice or statement to the Trustee. 11.15 Class D Secured Parties ----------------------- Following the Senior Secured Indebtedness Termination, if the Junior Lien shall not have been terminated in accordance with this Collateral Trust Agreement, (i) the Class D Secured Parties shall have the right to direct the Trustee in respect of enforcement of the Junior Lien by the establishment of an enforcement committee appointed by a Class D Secured Parties' Resolution in the same manner as the Enforcement Committee appointed by the Senior Secured Parties, and (ii) the Class D Secured Parties may, by providing an Enforcement Direction to the Trustee, instruct the Trustee in writing to waive, and the Trustee shall thereupon waive, enforcement of the Junior Lien at such time upon such conditions as may be prescribed in such Enforcement Direction (including without limitation the right to reconstitute the Enforcement Committee). ARTICLE XII CONCERNING THE TRUSTEE 12.1 Amount of Secured Indebtedness Outstanding ------------------------------------------ The Companies shall provide the Trustee with such information in writing relating to the Secured Indebtedness and any related commitments from time to time as the Trustee may reasonably request for the purpose of enabling the Trustee to fulfill its obligations hereunder. Such information will be provided as promptly as practicable and in any case within three Business Days after any request by the Trustee therefor. In addition, and without limiting the foregoing, the Companies will provide the Trustee with a written statement (a "Statement of Senior Secured Indebtedness") of the Outstanding U.S. Dollar ---------------------------------------- Equivalent amount of each Senior Secured Party's Senior Secured Indebtedness and the related unexpired and unterminated commitment amount (if any), relating thereto within one Business Day of the receipt of a written request therefor. If the Companies shall fail to provide the Trustee with the required information within such three or one Business Days, as the case may be, the Trustee shall be entitled to conclusively rely in respect of any Senior Secured Indebtedness, including the Outstanding amount thereof, on a written statement signed by the related Secured Party Representative. 69 12.2 Conditions Precedent to Trustee's Obligation to Act --------------------------------------------------- (1) Unless and until it shall have been required so to do under the terms hereof, the Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby; nor shall the Trustee be required to take notice of any Enforcement Event, other than in payment of any moneys required by any provision hereof to be paid to it, unless and until the Trustee receives notice in writing of such Enforcement Event (which notice shall specify the Enforcement Event desired to be brought to the attention of the Trustee), and prior to receipt of such written notice the Trustee may assume that each of the Pledgors is not in default hereunder or in any supplemental agreement or ancillary instrument hereto or in the observance or performance of any of the covenants, agreements or conditions contained herein or in any supplemental agreement or ancillary instrument hereto and that it is not required to take any action contemplated by such resolutions or orders. (2) The obligation of the Trustee to commence, continue, cease or refrain from any act, action or proceeding for the purpose of enforcing or ceasing to enforce any rights of the Trustee or the Secured Parties hereunder shall be conditional upon the Secured Parties furnishing, when required by notice in writing by the Trustee to the Secured Party Representative of such Secured Party, sufficient funds to commence or continue such act, action or proceeding and an indemnity reasonably satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges, expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof except for costs, charges and liabilities incurred by reason of the Trustee's gross negligence or wilful misconduct. Any Secured Party providing such indemnity shall be entitled to reimbursement of any and all amounts provided by such Secured Party under such indemnity in accordance with Section 8.10. ------------ (3) None of the provisions contained in this Collateral Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified as aforesaid. 12.3 Evidence -------- (1) Whenever it is provided in this Collateral Trust Agreement, with reference to any application to the Trustee for the execution and delivery of Additional Secured Indebtedness Registration Statements, the release of property, the withdrawal of money or other action hereunder, that either or both of the Companies shall deposit with the Trustee resolutions, certificates, reports, opinions, requests, orders or other documents, it is intended that the truth, accuracy and good faith at the time of granting of such application of the facts and opinions stated in all documents so deposited shall, in each and every such case, be conditions precedent to the right of the Company or Companies, as the case may be, to have 70 such application granted. The Trustee may conclusively rely and shall be protected in acting upon any such documents deposited with it in purported compliance with any such provision or for any other purpose hereof, but may require further evidence before acting or relying thereon. (2) The Trustee may rely conclusively and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter, telegram, cablegram or other paper or document believed by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties. However the Trustee may require reasonable evidence of the due execution thereof before acting or relying thereon. 12.4 Experts and Advisers -------------------- (1) The Trustee may at the expense of the Companies appoint such agents and employ or retain such counsel (including without limitation Canadian counsel), accountants, architects, engineers, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and shall not be responsible for any misconduct (other than through its own gross negligence or wilful misconduct) on the part of any of them. The Trustee may pay reasonable remuneration for all services performed for it in the discharge of the trusts hereof. For greater certainty, it is hereby declared that the entitlement of the Trustee to be paid or reimbursed for any expenses, disbursements or advances made by it in connection with this Section shall be governed by Section 7.5. ----------- (2) The Trustee may act (but shall not be bound to act) and shall be protected in acting in good faith on the opinion or advice of or information obtained from any counsel, accountant, investment banker, broker, architect, engineer, appraiser or other expert or adviser, whether retained or employed by any of the Pledgors or by the Trustee, in relation to any matter arising in the administration of the trusts hereof. 12.5 Cash, Documents, Etc. Held by the Trustee ----------------------------------------- Any cash, securities, documents of title or other instruments, and other assets that may at any time be deposited with or held by the Trustee in accordance with and subject to the trusts hereof, shall be placed in the deposit vaults of the Trustee or of any Canadian Schedule I chartered bank or a U.S. subsidiary of such chartered bank or deposited for safekeeping with any Canadian Schedule I chartered bank or a U.S. subsidiary of such chartered bank. 12.6 Cash, Documents, Etc. Paid or Delivered to the Trustee ------------------------------------------------------ Any cash, securities, documents of title or other instruments, and other assets that may from time to time be paid or delivered to the Trustee by any Pledgor to be held for the benefit of all Secured Parties in accordance with the provisions hereunder shall be so held by 71 the Trustee and shall be subject to the trusts hereunder. The Trustee shall not be obligated to take possession of any Pledged Shares other than those delivered to it by a Pledgor. 12.7 Action by Trustee to Protect Security ------------------------------------- After the occurrence of an Enforcement Event and prior to the first meeting of the Enforcement Committee, the Trustee shall have power to institute and to maintain such actions and proceedings as it may consider necessary or expedient upon advice of Counsel, upon which it may conclusively rely, to prevent any impairment of the Senior Lien by any acts of any Pledgor or of other Persons or to preserve or protect its interests and the security and interests of the Senior Secured Parties in respect of the Collateral or in respect of the income, earnings, rents, issues and profits therefrom. 12.8 Trustee Not Required to Give Security ------------------------------------- The Trustee shall not be required to give any bond or security in respect of the execution of the trusts and powers of this Collateral Trust Agreement or otherwise in respect of the premises. 12.9 Protection of Trustee and Secured Parties ----------------------------------------- By way of supplement to the provisions of any law for the time being relating to trustees but subject to the terms hereof, it is expressly declared and agreed as follows: (1) neither the Trustee nor any Secured Party shall be liable for or by reason of any failure or defect of title to or Lien upon, the Collateral; (2) neither the Trustee nor any Secured Party shall be liable for or by reason of any statements of fact in the recitals in this Collateral Trust Agreement (except in the certificate of the Trustee thereon or relating thereto) or required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Pledgors; (3) nothing herein contained shall cast any obligation on the Trustee to see to or to require evidence of the registration or filing or renewal of this Collateral Trust Agreement, the Joinder Agreements executed and delivered by the Pledgor Subsidiaries or other instrument ancillary or supplemental hereto or any other deed or writing by way of mortgage or charge upon the Collateral or any part thereof or upon any other property of any Pledgor or to give any request for renewal thereof or to procure any further, other or additional instrument of further assurance or to do any other act for the continuance of the Senior Lien or the Junior Lien or for giving notice of the existence of either such Lien or for extending or supplementing the same; 72 (4) neither the Trustee nor any Secured Party shall be bound to give notice to any Person or Persons of the execution hereof or of the Senior Lien or the Junior Lien and neither the Trustee nor any Secured Party shall be entitled in any way to interfere with the conduct of the Business, unless and until the Senior Lien or the Junior Lien shall have become enforceable and the Trustee shall have become bound to enforce the same; (5) neither the Trustee nor any Secured Party shall incur any liability or responsibility whatever to the Pledgors in consequence of permitting or suffering the Pledgors or their respective successors or assigns, to retain or be in possession of any part of the Collateral and to use and enjoy the same unless herein expressly otherwise provided; nor shall the Trustee or any of the Secured Parties be or become responsible or liable for any destruction, deterioration, loss, injury or damage which may be done or occur to the Collateral by the Pledgors, their respective agents or servants, or by any other Person or be in any way responsible for the consequences of any breach on the part of the Pledgors of any of the covenants herein or in any supplemental agreement or ancillary instrument hereto or of any acts of the agents or servants of the Pledgors; and (6) the Trustee and each Secured Party on its own behalf or in any other capacity, may buy, lend upon and deal in shares in the capital stock of TLGI and generally may contract and enter into financial transactions with either of the Companies or any Subsidiary without being liable to account for any profit made thereby, except to the extent such liability arises under Section 16 of the Securities Exchange Act of 1934, as amended, or ------------------------------- other insider trading laws. Nothing in this Collateral Trust Agreement shall restrict the ability of any of the Pledgors to buy, lend upon and deal in shares in the capital stock of the Trustee or any Secured Party. 12.10 Replacement of Trustee ---------------------- The Trustee may resign its trust and be discharged from the performance of all further duties hereunder by giving to the Companies and the Secured Party Representatives three months' notice in writing or such shorter notice as the Companies may accept as sufficient, provided that such resigning Trustee -------- receives payment in full of all amounts due and owing to it hereunder prior to or upon its resignation taking effect. The Secured Parties shall have power at any time to remove the Trustee and to appoint a new Trustee by means of a Secured Parties' Order. The Companies agree jointly and severally to pay such removed Trustee in full of all amounts due and owing to it hereunder prior to or upon its removal taking effect. In the event of the Trustee resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Companies shall forthwith appoint a new Trustee unless a new Trustee has already been appointed or designated by a Secured Parties' Order. Failing such appointment by the Companies the retiring Trustee or any Secured Party may apply to a judge of the Supreme Court of the State of New York sitting in New York City or the U.S. District Court for the Southern District of New York, on such notice as such judge may 73 direct, for the appointment of a new Trustee; but any new Trustee so appointed by the Companies or by the Court shall be subject to removal as aforesaid by the Secured Parties. Any new Trustee appointed under any provision of this Section shall be a corporation authorized and qualified to carry on the business of a trust company in the State of New York and in every other jurisdiction where such authorization or qualification is necessary to enable it to act as Trustee hereunder. On any new appointment the new Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Trustee, without any further assurance, conveyance, act or deed; but there shall be immediately executed, at the expense of the Companies, all such conveyances or other instruments as may, in the opinion of Counsel, be necessary or advisable for the purpose of assuring to the new Trustee a full estate in the Collateral. Any corporation into which the Trustee may be merged or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, consolidation or amalgamation to which the Trustee shall be a party, shall be the successor Trustee under this Collateral Trust Agreement without the execution of any instrument or any further act. 12.11 Acceptance of Trusts -------------------- The Trustee hereby accepts the trusts in this Collateral Trust Agreement declared and provided for and agrees to perform the same upon the terms and conditions herein set forth and to hold the Collateral and the pledges, charges, assignments, and security interests and all the rights, privileges and benefits conferred hereby and by law in trust for the various Persons who shall from time to time be Secured Parties, subject to all the terms and conditions set forth herein. 12.12 Co-Trustee; Separate Trustees. ----------------------------- (a) If at any time or times it shall be necessary or prudent in order to conform to any law of any jurisdiction in which any of the Collateral shall be located, or to avoid any violation of law or imposition on the Trustee of taxes by such jurisdiction not otherwise imposed on the Trustee, or the Trustee shall be advised by Counsel that it is necessary or prudent in the interest of the Secured Parties, or the Secured Parties shall (by a Secured Parties' Order) in writing so request the Trustee and the Companies, or the Trustee shall deem it desirable for its own protection in the performance of its duties hereunder or under any other Collateral Document, the Trustee and each of the Companies shall execute and deliver all instruments and agreements necessary or proper to constitute another bank or trust company, or one or more persons approved by the Trustee and the Companies, either to act as co-trustee or co-trustees of all or any of the Collateral under this Collateral Trust Agreement or under any of the other Collateral Documents, jointly with the Trustee originally named herein or therein or any successor Trustee, or to act as separate trustee or trustees of any of the Collateral. If either of the Companies shall not have joined in the execution of such instruments and agreements within 10 days after it receives a written request from the Trustee to do so, or if an Enforcement Order is in effect, the Trustee may 74 act under the foregoing provisions of this Section without the concurrence of the Companies and execute and deliver such instruments and agreements on behalf of the Companies. Each of the Companies hereby appoints the Trustee as its agent and attorney to act for it under the foregoing provisions of this Section in either of such contingencies. (6) Every separate trustee and every co-trustee, other than any successor Trustee appointed pursuant to Section 12.10, shall, to the extent permitted by ------------- law, be appointed and act and be such, subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred upon the Trustee in respect of the custody, control and management of moneys, papers or securities shall be exercised solely by the Trustee or any agent appointed by the Trustee; (ii) all rights, powers, duties and obligations conferred or imposed upon the Trustee hereunder and under the relevant Collateral Documents shall be conferred or imposed and exercised or performed by the Trustee and such separate trustee or separate trustees or co-trustee or co-trustees, jointly, as shall be provided in the instrument appointing such separate trustee or separate trustees or co-trustee or co-trustees, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, or unless the performance of such act or acts would result in the imposition of any tax on the Trustee which would not be imposed absent such joint act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co-trustee or co-trustees; (iii) no power given hereby or by the relevant Collateral Documents to, or which it is provided herein or therein may be exercised by, any such co-trustee or co-trustees or separate trustee or separate trustees, shall be exercised hereunder or thereunder by such co-trustee or co-trustees or separate trustee or separate trustees except jointly with, or with the consent in writing of, the Trustee anything contained herein to the contrary notwithstanding; (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (v) TLGI and the Trustee, at any time by an instrument in writing executed by them jointly, may accept the resignation of or remove any such separate trustee or co-trustee and, in that case by an instrument in writing executed by them jointly, may appoint a successor to such separate trustee or co-trustee, as the case may be, anything contained herein to the contrary notwithstanding. If TLGI shall not have joined in the execution of any such instrument within 10 days after it receives a written request from the Trustee to do so, or if an Enforcement Order is in effect, the Trustee shall 75 have the power to accept the resignation of or remove any such separate trustee or co-trustee and to appoint a successor without the concurrence of TLGI, TLGI hereby appointing the Trustee its agent and attorney to act for it in such connection in such contingency. If the Trustee shall have appointed a separate trustee or separate trustees or co-trustee or co- trustees as above provided, the Trustee may at any time, by an instrument in writing, accept the resignation of or remove any such separate trustee or co-trustee and the successor to any such separate trustee or co-trustee shall be appointed by TLGI and the Trustee, or by the Trustee alone pursuant to this subsection 12.12(b). ------------------- ARTICLE XIII MISCELLANEOUS 13.1 Notice ------ Subject to Section 11.14, all communications and notices provided for ------------- hereunder and all legal processes in regard hereto shall be in writing and hand- delivered or transmitted by facsimile to the intended recipient addressed as follows: (1) if to TLGI: 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice-President, Finance Facsimile: (604) 473-7305 with a copy to: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice-President, Law and Corporate Secretary Facsimile: (604) 473-7344 76 (2) if to LGII or any other Pledgor Subsidiary: c/o The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice-President, Finance Facsimile: (604) 473-7305 with a copy to: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice-President, Law and Corporate Secretary Facsimile: (604) 473-7344 (3) if to the Trustee: Bankers Trust Company Four Albany Street New York, NY 10006 Attention: Corporate Trust and Agency Group Facsimile: (212) 250-6961 or (212) 250-6392 Telephone: (212) 250-6648 (4) if to a Secured Party Representative, at the address of such Secured Party Representative set forth in Schedule 5; ---------- or, in the case of a Pledgor or a Secured Party Representative, at such other address as shall be designated by such Pledgor or Secured Party Representative, as the case may be, in a written notice to the Trustee, and in the case of the Trustee at such other address (which address shall be in New York City) as shall be designated by the Trustee to the Companies and the Secured Party Representatives. Each such communication, notice or process shall be deemed to have been received at the time of hand-delivery or facsimile transmission if prior to 4:00 p.m. on a Business Day in the place of delivery or receipt, or otherwise at the opening of business at such place on the next following Business Day. 77 13.2 Business Day ------------ If the date upon which any act or payment hereunder is required to be done or made falls on a day which is not a Business Day, then such act or payment shall be duly performed or made if done on the next following Business Day. 13.3 Remedies Subject to Applicable Law ---------------------------------- All rights, remedies and powers provided herein may be exercised or enforced only to the extent that the exercise or enforcement thereof does not violate any applicable provision of law, and all the provisions of this Collateral Trust Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling in the circumstances and to be limited to the extent necessary so that they will not render this Collateral Trust Agreement invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law. Any provision hereof contrary to applicable law shall be deemed to be ineffective and shall be severable from and not invalidate any other provision of this Collateral Trust Agreement. 13.4 No Waiver --------- This Collateral Trust Agreement may not be amended except by a writing executed by the Trustee and each of the Pledgors, subject to Article IX hereof. ---------- Any indulgence or forbearance or failure by the Trustee to insist on the strict and timely performance of any provision of this Collateral Trust Agreement shall not affect the future right of the Trustee to insist on the strict and timely performance of the same or any other provision of this Collateral Trust Agreement thereafter. 13.5 Applicable Law -------------- This Collateral Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York (without reference to any conflict or other choice of law or rules which might otherwise apply, except General Obligations Law (S)5-1401) except to the extent that the validity or perfection of any security interest, or remedies hereunder or under the other Collateral Documents, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York. 13.6 Counterparts ------------ This Collateral Trust Agreement may be executed in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument. 78 13.7 CONSENT TO JURISDICTION ----------------------- EACH OF THE PLEDGORS HEREBY IRREVOCABLY SUBMITS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY COLLATERAL DOCUMENTS AND EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING IN THIS SECTION SHALL LIMIT THE RIGHT OF THE TRUSTEE OR, SUBJECT TO SECTION 8.8, ANY SECURED PARTY TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY PLEDGOR AGAINST THE TRUSTEE OR ANY SECURED PARTY OR ANY AFFILIATE OF THE TRUSTEE OR ANY SECURED PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH ANY COLLATERAL DOCUMENT SHALL BE BROUGHT ONLY IN A FEDERAL OR STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY. EACH OF THE PLEDGORS HEREBY IRREVOCABLY APPOINTS THELEN, MARRIN, JOHNSON & BRIDGES (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 330 MADISON ------------- AVENUE, 11TH FLOOR, NEW YORK, NEW YORK 10017, ATTENTION: DAVID P. GRAYBEAL, ESQ., AS ITS AGENT TO RECEIVE ON BEHALF OF SUCH PLEDGOR AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO SUCH PLEDGOR IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS WITH A COPY TO SUCH PLEDGOR AT ITS ADDRESS FOR NOTICES HEREUNDER, AND EACH PLEDGOR HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH PLEDGOR ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO ITS ADDRESS FOR NOTICES HEREUNDER. EACH PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 79 13.8 WAIVER OF JURY TRIAL --------------------- EACH PLEDGOR AND THE TRUSTEE HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH ANY COLLATERAL DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 80 IN WITNESS WHEREOF the parties hereto have executed these presents by their respective proper officers or authorized signatories in that behalf. Officer Signature BANKERS TRUST COMPANY ___________________________ ______________________________________ Name: Authorized Officer ______________________________________ Authorized Officer THE LOEWEN GROUP INC. By: ___________________________________ Name: ________________________________ Title: ________________________________ LOEWEN GROUP INTERNATIONAL, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ S-1 2239699 MANITOBA LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory 307744 SASKATCHEWAN LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory 60752 MANITOBA LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory CANADIAN FUNERAL SERVICES INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-2 CAROTHERS HOLDING COMPANY, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory CENTRE-SASK FUNERAL MANAGEMENT CO. LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory CHAPEL HILL FUNERAL HOME LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory COMMUNITY FUNERAL HOMES OF WISCONSIN, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-3 COMSTOCK FUNERAL HOME (1987) LTD. By: ___________________________________ Name: Peter S. Hyndman Title: Authorized Signatory D.H. AXTELL, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory EAGAN HOLDING COMPANY By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory EASTGATE HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-4 FAMILY FUNERAL SERVICE GROUP, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory FRANK J. FISHER FUNERAL DIRECTORS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory GIFFEN-MACK CHAPEL LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-5 GREEN ACRES MEMORIAL GARDENS (1969) LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory GREEN SERVICE CORPORATION By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory H. & D. MANAGEMENT COMPANY, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory HAMILTON-HARRON FUNERAL CENTRE AND CREMATORIUM LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-6 HAYWARDS THOMSON & IRVING FUNERAL DIRECTORS (1986) INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory HENDERSON'S FUNERAL HOMES LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory HIGHLAND MEMORY GARDENS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory HOLLYBURN FUNERAL HOME LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-7 J.A. SNOW'S FUNERAL HOME (1985) LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory JAMES FUNERAL HOME, INCORPORATED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory JAYNE'S FUNERAL HOME (1984) LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory KAPALA-GLODEK FUNERAL SERVICE, LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-8 KRAEER HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LEITZ-EAGAN FUNERAL HOME, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LEVITT-WEINSTEIN MEMORIAL CHAPELS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LINEBERRY GROUP, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-9 LOEWEN (ALABAMA), INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOEWEN FINANCIAL CORPORATION By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOEWEN FUNERAL CHAPELS (1973) LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOEWEN (GEORGIA), INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-10 LOEWEN GROUP INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOEWEN (INDIANA), INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOEWEN LOUISIANA HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-11 LOEWEN (TEXAS), INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory LOWELL HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory MALLETTA-VERTIN HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory MAYES MORTUARY, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-12 MHI GROUP, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory MIDWEST CEMETERY SERVICE COMPANY By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory MULLINS HOLDING COMPANY By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory MURRAY COMMUNITY FUNERAL HOMES, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-13 NEW ENGLAND HOLDING COMPANY, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory NEWEOL INVESTMENTS LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory OSIRIS HOLDING CORPORATION By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory OSIRIS HOLDING OF ILLINOIS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-14 OSIRIS HOLDING OF WISCONSIN, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory PABRIL VENTURES LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory PAPERMAN & SONS INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory PIERCY'S FUNERAL HOMES LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-15 PRAIRIE FUNERAL SERVICES LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory RIEMANN HOLDINGS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory ROBERT A. WEINSTEIN, LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S & H PROPERTIES AND ENTERPRISES, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory SAULT STE. MARIE FUNERAL HOMES LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-16 SMITH-REARDON INCORPORATED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory STEPHENS FUNERAL HOMES, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory SUBURBAN FUNERAL HOMES LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory SUNSET MEMORIAL PARK, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory SURREY MEMORIAL SERVICES AND CREMATORIUM LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-17 THE J. THOMSON COMPANY LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory THE RATZ-BECHTEL LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-18 THWEATT-KING FUNERAL HOME, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory TLGI HOLDINGS LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory TLGI MANAGEMENT CORP. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory TLGM HOLDINGS INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-19 TROISPAP INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory VANCOUVER FUNERAL CHAPEL, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory VANCOUVER MEMORIAL SERVICES AND CREMATORIUM LTD. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory VAY-MEESON HOLDING COMPANY, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-20 WAGNER ACQUISITION CORPORATION By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WAYNE HATT ENTERPRISES LIMITED By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WEINSTEIN BROTHERS, INC. By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WEINSTEIN FAMILY SERVICES, INC. (AN ILLINOIS CORPORATION) By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WEINSTEIN FAMILY SERVICES, INC. (A FLORIDA CORPORATION) By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-21 WHITEHURST CALIFORNIA By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WOODLAWN MEMORIAL PARK CORPORATION By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory WRIGHT & FERGUSON FUNERAL HOME By: _________________________________ Name: Peter S. Hyndman Title: Authorized Signatory S-22 SCHEDULE 1 INITIAL SECURED INDEBTEDNESS CLASS A SECURED INDEBTEDNESS 1996 CREDIT AGREEMENT - aggregate principal committed amount of U.S. $750,000,000 of LGII on May 30, 1996, guaranteed by TLGI. Secured Party Representative: Bank of Montreal MEIP CREDIT AGREEMENT - aggregate principal amount outstanding of U.S. $116,006,970 of Loewen Management Investment Corporation as agent for LGII on May 17, 1996, guaranteed by TLGI. Secured Party Representative: Wachovia Bank of Georgia, N.A. RBC CREDIT AGREEMENT - aggregate principal committed amount of Cdn. $50,000,000 of TLGI of which Cdn. $41,551,391 was outstanding on May 17, 1996, guaranteed by LGII. Secured Party Representative: Royal Bank of Canada DRESDNER CREDIT AGREEMENT - aggregate principal amount outstanding of Cdn.$20,000,000 of TLGI on May 17, 1996, guaranteed by LGII. Secured Party Representative: Dresdner Bank Canada - aggregate principal amount outstanding of Cdn.$15,000,000 of TLGI on May 17, 1996, guaranteed by LGII. Secured Party Representative: ABN AMRO Bank Canada CLASS B SECURED INDEBTEDNESS SERIES A NOTES - -------------- "Series A Notes" means the Senior Guaranteed Notes, Series A dated October 30, -------------- 1991 in the original aggregate principal amount of U.S.$100,000,000 issued by LGII pursuant to the Note Agreements dated for reference October 1, 1991 of LGII and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $75,000,000 on May 17, 1996, and "Series A Note" means any of them. ------------- Secured Party Representatives: As listed on Schedule 5 under "Class B Secured Indebtedness", "Series A Notes". SERIES B NOTES - -------------- "Series B Notes" means the Senior Guaranteed Notes, Series B dated October 30, -------------- 1991 in the original aggregate principal amount of U.S.$50,000,000 issued by LGII pursuant to the Note Agreements dated for reference October 1, 1991 of LGII and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $42,850,000 on May 17, 1996, and "Series B -------- Note" means any of them. - ---- Secured Party Representatives: As listed on Schedule 5 under "Class B Secured Indebtedness", "Series B Notes". SERIES C NOTES - -------------- "Series C Notes" means the Senior Guaranteed Notes, Series C dated October 30, -------------- 1991 in the original aggregate principal amount of U.S.$25,000,000 issued by TLGI pursuant to the Note Agreements dated for reference October 1, 1991 of LGII and TLGI with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $18,750,000 on May 17, 1996, and "Series C Note" means any of them. ------------- Secured Party Representatives: As listed on Schedule 5 under "Class B Secured Indebtedness", "Series C Notes". SERIES D NOTES - -------------- "Series D Notes" means the Senior Guaranteed Notes, Series D dated September 10, -------------- 1993 in the original aggregate principal amount of U.S. $60,000,000 issued by TLGI pursuant to the Note Agreements dated for reference September 1, 1993 of TLGI and LGII with the purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $60,000,000 on May 17, 1996, and "Series D Note" means any of them. ------------- Secured Party Representatives: As listed on Schedule 5 under "Class B Secured Indebtedness", "Series D Notes". SERIES E NOTES - -------------- "Series E Notes" means the Senior Guaranteed Notes, Series E dated February 24, -------------- 1994 in the original aggregate principal amount of U.S. $50,000,000 issued by LGII pursuant to the Note Agreements dated for reference February 1, 1994 of LGII and TLGI with the Purchasers thereof, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $50,000,000 on May 17, 1996, and "Series E Note" means any of them. ------------- Secured Party Representatives: As listed on Schedule 5 under "Class B Secured Indebtedness", "Series E Notes". TLGI SERIES A AND B NOTE GUARANTEE - ---------------------------------- "TLGI Series A and B Note Guarantee" means the Guaranty Agreement dated for ---------------------------------- reference October 1, 1991 pursuant to which TLGI guarantees the due and punctual payment of the 2 indebtedness and performance of the obligations of LGII as issuer of the Series A Notes and the Series B Notes under the terms of such Notes and under the related Note Agreements. LGII SERIES C NOTE GUARANTEE - ---------------------------- "LGII Series C Note Guarantee" means the Guaranty Agreement dated for ---------------------------- reference October 1, 1991 pursuant to which LGII guaranteed the due and punctual payment of the indebtedness and performance of the obligations of TLGI as issuer of the Series C Notes under the terms of such Notes and under the related Note Agreements. LGII SERIES D NOTE GUARANTEE - ---------------------------- "LGII Series D Note Guarantee" means the Guaranty Agreement dated for reference ---------------------------- April 1, 1993 pursuant to which LGII guarantees the due and punctual payment of the indebtedness and the performance of the obligations of TLGI as issuer of the Series D Notes under the terms of such Notes and under the related Note Agreements. TLGI SERIES E NOTE GUARANTEE - ---------------------------- "TLGI Series E Note Guarantee" means the Guaranty Agreement dated for ---------------------------- reference February 1, 1994 pursuant to which TLGI guarantees the due and punctual payment of the indebtedness and the performance of the obligations of LGII as issuer of the Series E Notes under the terms of such Notes and under the related Note Agreements. CLASS C SECURED INDEBTEDNESS SERIES 1 NOTES - -------------- "Series 1 Notes" means the Series 1 Senior Guaranteed Notes dated March 20, 1996 -------------- in the original aggregate principal amount of U.S. $225,000,000 issued by LGII pursuant to the Indenture dated as of March 20, 1996 among LGII, TLGI and Fleet National Bank of Connecticut, as trustee (the "1996 Public Notes Trustee"), and ------------------------- guaranteed by LGII pursuant to such Indenture, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. $225,000,000 on May 17, 1996, and "Series 1 Note" means any of them. Secured Party Representative: ------------- Fleet National Bank of Connecticut SERIES 2 NOTES - -------------- "Series 2 Notes" means the Series 2 Senior Guaranteed Notes dated March 20, 1996 -------------- in the original aggregate principal amount of U.S. $125,000,000 issued by LGII pursuant to the Indenture dated as of March 20, 1996 among LGII, TLGI and Fleet National Bank of Connecticut, as trustee, and guaranteed by LGII pursuant to such Indenture, from time to time outstanding, and having an aggregate principal amount outstanding of U.S. 3 $125,000,000 on May 17, 1996, and "Series 2 Note" means any of them. Secured ------------- Party Representative: Fleet National Bank of Connecticut CLASS D SECURED INDEBTEDNESS LFW Loans - --------- Revolving Credit and Term Loan Facility, dated August 15, 1994, as amended by Letter Agreement dated February 8, 1995 between LFW and LGII. Loan Agreement dated April 11, 1995, as amended by Amendment No. 1 dated September 29, 1995, between LFW and LGII. Loan Agreement dated February 1, 1996 between LFW and LGII. Secured Party Representative: LFW 4 SCHEDULE 2 PLEDGORS AND INITIAL PLEDGED SUBSIDIARY SHARES SCHEDULE 3 EXCLUDED SUBSIDIARIES SCHEDULE 4 CERTAIN APPROVALS SCHEDULE 5 NOTICE INFORMATION FOR SECURED PARTY REPRESENTATIVES EXHIBIT A FORM OF ADDITIONAL SECURED INDEBTEDNESS REGISTRATION STATEMENT DATE: ________, ____ Reference is made to the Collateral Trust Agreement dated as of May 15, 1996 (as the same may be amended, supplemented, restated, or otherwise modified from time to time the "Collateral Trust Agreement"; capitalized terms not -------------------------- otherwise defined herein being used herein as defined in the Collateral Trust Agreement), among The Loewen Group, Inc., Loewen Group International, Inc., various other Subsidiaries of The Loewen Group, Inc., and Bankers Trust Company, as Trustee. By executing and delivering this Additional Secured Indebtedness Registration Statement and, upon the acceptance and recordation hereof by the Trustee in accordance with Section 2.3 of the Collateral Trust Agreement, ----------- ________________ (the "Secured Party Representative") hereby agrees on behalf of ---------------------------- itself and the Holders it represents to be bound by all the terms and provisions of the Collateral Trust Agreement applicable to a Holder and a Secured Party Representative, as applicable, of Secured Indebtedness, and its address for the purposes of Section 13.1 until changed in accordance therewith is as set forth below. The undersigned Companies and the Secured Party Representative each hereby confirms that (i) the Secured Party Representative represents Holders of Additional Secured Indebtedness, (ii) furnished herewith is a true and complete copy of [GIVE TITLE(S), DATE(S) AND PARTIES OF THE AGREEMENTS UNDER WHICH THE INDEBTEDNESS HAS BEEN (OR IS TO BE) INCURRED] which shall, upon acceptance and registration of this Statement pursuant to section 2.5 of the Collateral Trust Agreement, be incorporated in the definition of "Financing Agreements" for the purposes of the Collateral Trust Agreement (and for greater certainty, shall be included in such term as used in the following paragraph) (iii) the original outstanding aggregate principal amount of such Additional Secured Indebtedness was [Cdn.] [U.S.] $________ and the current outstanding aggregate principal amount thereof is [Cdn.] [U.S.] $_________ [, the current aggregate amount of credit committed under such Financing Agreement(s) is [Cdn.] [U.S.] $___________,] and (iv) such Additional Secured Indebtedness is Class [A] [B] [C] [D] Secured Indebtedness. [INSERT IF CLASS A SECURED INDEBTEDNESS: The Appointing Group for such Additional Secured Indebtedness is designated as ________________]. The undersigned Companies certify that the designation of Additional Secured Indebtedness under this Additional Secured Indebtedness Registration Statement is permitted and will not result in any breach of any Financing Agreement and the proposed classification of Additional Secured Indebtedness under this Additional Secured Indebtedness Registration Statement has been approved by the requisite parties to any Financing Agreements requiring such approval. A-1 This Additional Secured Indebtedness Registration Statement shall be construed in accordance with and governed by the laws of the State of New York without regard to conflicts of law principles. A-2 IN WITNESS WHEREOF, the undersigned have caused this Additional Secured Indebtedness Registration Statement to be executed as of the day and year first written above. [NAME OF SECURED PARTY REPRESENTATIVE] By:__________________________________ Name: Title: Notice Information: ------------------ Address:_____________________________ Contact:_____________________________ Telephone No.:_______________________ Facsimile No.:_______________________ THE LOEWEN GROUP INC. By:__________________________________ Name: Title: LOEWEN GROUP INTERNATIONAL, INC. By:__________________________________ Name: Title: A-3 EXHIBIT B FORM OF JOINDER AGREEMENT THIS JOINDER AGREEMENT dated as of ___________ is BETWEEN: _________________________________, a ________________ organized under the laws of _______________ (hereinafter called the "New Pledgor Subsidiary"), ---------------------- - and - BANKERS TRUST COMPANY (hereinafter called the "Trustee"). ------- WHEREAS The Loewen Group Inc. ("TLGI") and Loewen Group International, Inc. ---- ("LGII") and various other Subsidiaries of TLGI and Bankers Trust Company, as ---- Trustee have entered into a Collateral Trust Agreement dated as of May 15, 1996 (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Collateral Trust Agreement"); -------------------------- AND WHEREAS the New Pledgor Subsidiary is a Pledgor Subsidiary and owns directly the Pledged Shares listed on Schedule A attached hereto and issued by ---------- the Pledged Share Issuers listed therein; AND WHEREAS the New Pledgor Subsidiary may from time to time have certain rights under one or more Share Option Agreements (including those listed in Schedule B attached hereto) (as defined in the Collateral Trust Agreement); - ---------- AND WHEREAS in consideration of the administrative services and financing made or provided by the Obligors to the New Pledgor Subsidiary from time to time, the New Pledgor Subsidiary at the request of the Obligors has agreed to enter into this Agreement in order to assist the Obligors, for the material benefit of the Obligors and the New Pledgor Subsidiary, to provide requisite security for the Secured Indebtedness; AND WHEREAS the New Pledgor Subsidiary under the laws relating thereto is duly authorized to enter into the Collateral Trust Agreement and all things necessary, including any necessary consents of shareholders of the Pledgor Subsidiary, have been done and performed to make the Collateral Trust Agreement a valid and binding guarantee and security agreement for the security of the Secured Indebtedness, B-1 AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Pledgor Subsidiary and not by the Trustee; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, the Pledgor Subsidiary covenants and agrees with the Trustee as follows: ARTICLE I INTERPRETATION 1.1 DEFINITIONS ----------- In this Agreement: (1) any defined term used herein and not defined herein shall have the meaning given to such term in the Collateral Trust Agreement; and (2) wherever the Pledgor Subsidiary, TLGI, LGII or the Trustee is mentioned or referred to, such mention or reference shall extend to the successors and assigns of the Pledgor Subsidiary, TLGI, LGII or the Trustee, as the case may be. 1.2 HEADINGS, ETC. ------------- The division of this Agreement into Articles, Sections and subsections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. ARTICLE II JOINDER AGREEMENT 2.1 WARRANTIES. ---------- The New Pledgor Subsidiary (a) warrants to the Trustee that it is the beneficial owner of the Pledged Shares listed on Schedule A hereto together with ---------- the Share Option Rights under agreements listed in Schedule B hereto (the ---------- "Additional Pledgor Collateral"); and (b) makes the representations set forth in - ------------------------------ Article VI of the Collateral Trust Agreement with respect to such Pledgor Subsidiary. B-2 2.2 UNDERTAKING ----------- Effective as of the date hereof, the New Pledgor Subsidiary undertakes all obligations of a Pledgor Subsidiary (including, without limitation, the guaranty pursuant to Article V of the Collateral Trust Agreement) under the Collateral Trust Agreement. 2.3 SECURITY INTERESTS ------------------ The New Pledgor Subsidiary (a) does hereby pledge, charge, assign and transfer to and in favor of the Trustee, and does hereby create and grant a first priority security interest in favor of the Trustee in, in trust for the equal and ratable benefit of all Senior Secured Parties, as security for (A) the due payment by the Companies of all amounts payable to the Trustee, the Enforcement Representatives and the Secured Party Representatives under the Collateral Trust Agreement, (B) the due payment by the Obligors of the Senior Secured Indebtedness, (C) the due performance of the obligations of the Companies contained in the Collateral Trust Agreement, and (D) the due performance by the New Pledgor Subsidiary of its obligations contained herein and in the Collateral Trust Agreement, including without limitation Article V thereof, all Collateral of the New Pledgor Subsidiary, including without limitation the Additional Pledgor Collateral, all pursuant to and in accordance with the Collateral Trust Agreement; and (b) does hereby pledge, charge, assign and transfer to and in favor of the Trustee and does hereby create and grant a security interest in favor of the Trustee in, in trust for the equal and ratable benefit of all Class D Secured Parties as security for the Class D Secured Indebtedness, all Collateral of such New Pledgor Subsidiary, all on a basis junior and subordinate to and subject to the satisfaction in full of the Senior Secured Indebtedness and the obligations hereunder of the Companies and Pledgor Subsidiaries to the Senior Secured Parties and their Enforcement Representatives and the Senior Secured Indebtedness Termination. ARTICLE III MISCELLANEOUS 3.1 NOTICE ------ All communications and notices provided for under the Collateral Trust Agreement to the New Pledgor Subsidiary shall be addressed as follows: c/o The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice-President, Finance Telecopier: (604) 473-7305 B-3 with a copy to: The Loewen Group Inc. 4126 Norland Avenue Burnaby, British Columbia Canada V5G 3S8 Attention: Vice President, Law and Corporate Secretary Telecopier: (604) 473-7344 or at such other address as such New Pledgor Subsidiary may designate in accordance with Section 13.1 of the Collateral Trust Agreement. 3.2 APPLICABLE LAW -------------- This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. IN WITNESS WHEREOF the New Pledgor Subsidiary has duly executed this Joinder Agreement as of the date first set forth above. [NAME OF NEW PLEDGOR SUBSIDIARY] ------------------------------ By:_________________ Name: Title: B-4 SCHEDULE A PLEDGED SHARES Number and Name of Company Share Certificate Number Type of Shares - --------------- ------------------------ -------------- B-5 SCHEDULE B SHARE OPTION AGREEMENTS B-6 EXHIBIT C FORM OF NOTICE OF PLEDGE [NAME AND ADDRESS OF PLEDGOR] ----------------------------- [DATE , ] -------------- ----- BY HAND [Name of Pledged Share Issuer] _______________________________________________ _______________________________________________ Attention: ____________________________________ Dear Sirs: [Name of Pledgor] (the "Pledgor") is the beneficial owner of the equity ------- interests listed on Schedule I hereto (the "Pledged Stock"). ---------- ------------- Effective as of the date hereof, Pledgor is pledging, assigning and hypothecating to Bankers Trust Company, as trustee (in such capacity, together with its successors and assigns in such capacity, the "Trustee") for various ------- creditors, and granting to the Trustee a first priority security interest in, the Pledged Stock, all pursuant to the Collateral Trust Agreement dated as of May 15, 1996 (as amended, supplemented, restated, or otherwise modified or replaced from time to time, the "Collateral Trust Agreement"), by Pledgor and -------------------------- certain of its affiliates and accepted by the Trustee. Pledgor hereby requests and instructs you to mark your books and records to reflect the pledge of the Pledged Stock to the Trustee. C-1 Kindly acknowledge your receipt of this letter and your agreement thereto by signing the enclosed copy of this letter in the space indicated below and returning it to [Name of Pledgor] at the address indicated above. Very truly yours, [NAME OF PLEDGOR] By:______________________________ Title: ACKNOWLEDGED AND AGREED TO: [Pledged Share Issuer] By: _______________________ Title: C-2 EXHIBIT D FORM OF COLLATERAL DELIVERY NOTICE PURSUANT TO SECTION 7.3 OF THE COLLATERAL TRUST AGREEMENT [NAME AND ADDRESS OF PLEDGOR] [DATE] Bankers Trust Company, as Trustee Four Albany Street New York, New York 10006 Attention: Corporate Trust and Agency Group Dear Sirs: Reference is made to that certain Collateral Trust Agreement dated as of May 15, 1996 (as amended, supplemented, restated, or otherwise modified from time to time, the "Collateral Trust Agreement"), by [Name of Pledgor] ("[Name of -------------------------- -------- Pledgor]"), The Loewen Group Inc., Loewen Group International, Inc., certain of - -------- their Subsidiaries and Bankers Trust Company (the "Trustee"). [Name of Pledgor] ------- is the legal and beneficial owner of the Collateral listed on Schedule I hereto. ---------- Capitalized terms used but not defined herein shall have the meanings set forth in the Collateral Trust Agreement. [Name of Pledgor] hereby notifies the Trustee that it has taken the following actions necessary to maintain the Senior Lien as a valid and effective first priority perfected security interest and the Junior Lien as a valid and effective second priority perfected security interest pursuant to the Collateral Trust Agreement: [1. Delivered to the Trustee, herewith, the share certificates evidencing the Collateral listed on Schedule I, together with all necessary ---------- instruments of transfer or assignment, duly executed in blank and undated;] [2. Delivered to the Trustee, herewith, an opinion of Counsel [In the case of Collateral other than Pledged Shares in a corporation evidenced by share certificates] to the effect that [Name of Pledgor] has taken such actions necessary to maintain the [Senior Lien as a valid and effective perfected security interest] [Junior Lien as a valid and effective perfected security interest;] D-1 [3. Describe the registration, filing, recording or renewal of any of the Collateral Trust Agreement, Joinder Agreement and each instrument supplemental or ancillary thereto and/or, if applicable, a financing statement or other prescribed statement in respect thereof at all offices such registration, filing or recording is necessary in preserving or protecting the Senior Lien and/or the Junior Lien;] Pursuant to Section 7.3(4) of the Collateral Trust Agreement, the undersigned, ________________, being a duly elected, qualified and acting ________________ of [Name of Pledgor], hereby certifies that (i) [Name of Pledgor] has taken such actions as are necessary to maintain the [Senior Lien as a valid and effective first priority perfected security interest] [Junior Lien as a valid and effective second priority perfected security interest] and otherwise complied with the provisions of Section 7.3 of the Collateral Trust Agreement and (ii) Schedule I hereto describes all appropriate modifications ---------- required to be made to Schedule 2 to the Collateral Trust Agreement to reflect ---------- the additional collateral. Very Truly Yours, [NAME OF PLEDGOR] By:_________________________ Title: D-2 EXHIBIT E FORM OF CONFIRMATION OF TERMINATION OF PLEDGOR SUBSIDIARY'S OBLIGATIONS PURSUANT TO SECTION 5.3 OF THE COLLATERAL TRUST AGREEMENT Bankers Trust Company Four Albany Street New York, New York 10006 ____________ __, _____ _________________________________________ _________________________________________ _________________________________________ Dear Sirs: Reference is made to that Certain Collateral Trust Agreement dated as of May 15, 1996 (as may be amended, supplemented, restated or otherwise modified from time to time, the "Collateral Trust Agreement"), among The Loewen Group Inc. (the "Company"), Loewen Group International, Inc., certain of their Subsidiaries and Bankers Trust Company (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings set forth in the Collateral Trust Agreement. Pursuant to Section 5.3 of the Collateral Trust Agreement, the Trustee hereby confirms the termination of the obligations of [Name of Pledgor Subsidiary] under the Collateral Trust Agreement. Very truly yours, BANKERS TRUST COMPANY, as Trustee By:___________________________ Title: E1 EX-4.29 4 SECOND AMENDMENT TO NOTE AGREEMENTS EXHIBIT 4.29 ================================================================================ THE LOEWEN GROUP INC. and LOEWEN GROUP INTERNATIONAL, INC. ------------------------------ SECOND AMENDMENT Dated for reference May 15, 1996 to NOTE AGREEMENTS Dated for reference October 1, 1991 ------------------------------ Re: U.S. $100,000,000 9.70% Senior Guaranteed Notes, Series A, Due November 1, 1998, U.S. $50,000,000 9.93% Senior Guaranteed Notes, Series B, Due November 1, 2001, and U.S. $25,000,000 9.70% Senior Guaranteed Notes, Series C, Due November 1, 1998 ================================================================================ SECOND AMENDMENT TO NOTE AGREEMENTS THIS SECOND AMENDMENT, dated for reference May 15, 1996 (the or this "Second Amendment"), to the Note Agreements, each dated for reference October 1, 1991, is among The Loewen Group Inc., a corporation incorporated under the laws of the Province of British Columbia ("TLGI"), Loewen Group International, Inc., a Delaware corporation ("LGII"), and each of the institutions which is a signatory to this Second Amendment (collectively, the "Noteholders"). RECITALS: A. TLGI, LGII and each of the Noteholders are parties to the separate and several Note Agreements, each dated for reference October 1, 1991, as amended by the First Amendment to Series A, B and C Note Agreement, dated as of June 10, 1994 (collectively, the "Note Agreements"). LGII heretofore issued (i) the U.S. $100,000,000 9.70% Senior Guaranteed Notes, Series A, Due November 1, 1998 (the "Series A Notes") and (ii) the U.S. $50,000,000 9.93% Senior Guaranteed Notes, Series B, Due November 1, 2001 (the "Series B Notes") and TLGI heretofore issued the U.S. $25,000,000 9.70% Senior Guaranteed Notes, Series C, Due November 1, 1998 (the "Series C Notes", said Series C Notes together with the Series A Notes and the Series B Notes are hereinafter referred to collectively as the "Notes"), pursuant to the Note Agreements. The Noteholders are the holders of _____% of the outstanding principal amount of the Notes. B. TLGI, LGII and the Noteholders now desire to amend the Note Agreements in the respects, but only in the respects, hereinafter set forth. C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Agreements unless herein defined or the context shall otherwise require. D. All requirements of law have been fully complied with and all other acts and things necessary to make this Second Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed. NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Second Amendment set forth in (S)3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, TLGI, LGII and the Noteholders do hereby agree as follows: SECTION 1. AMENDMENTS. 1.1 Section 5.6 of the Note Agreements shall be and is hereby amended in its entirety to read as follows: "5.6. Consolidated Net Worth. TLGI will (a) at all times during any period on or before December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than Can. $150,000,000 and (b) at all times during any period after December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than the sum of (i) U.S. $450,000,000 plus (ii) 50% of Consolidated Net Income for any fiscal quarter ending after December 31, 1995 (but only to the extent that, in the case of any such fiscal quarter, Consolidated Net Income for such fiscal quarter is at least $1.00), determined on a cumulative basis." 1.2 Section 5.8 of the Note Agreements shall be and is hereby amended by adding the following new subsection (d): "(d) TLGI and LGII will not permit any Indebtedness to constitute Class A Secured Indebtedness or Class B Secured Indebtedness under the Collateral Trust Agreement other than (1) such Indebtedness which is initial Class A Secured Indebtedness or initial Class B Secured Indebtedness described on Schedule 1 to the Collateral Trust Agreement as of May 30, 1996 and (2) such other Indebtedness which, at the time of designation pursuant to Section 2.5 of the Collateral Trust Agreement, has a weighted average life to maturity less than or equal to 150% and greater than or equal to 50% of the then weighted average life to maturity of (x) the existing Class A Secured Indebtedness in the case of new Class A Secured Indebtedness or (y) the existing Class B Secured Indebtedness in the case of new Class B Secured Indebtedness." 1.3 Clause (e) of Section 5.9 of the Note Agreements shall be and is hereby amended by deleting the words "including without limitation the Lien of the Trust Deed" and inserting the following phrase in lieu thereof: "and Liens (1) created pursuant to the Collateral Trust Agreement to secure Indebtedness existing on the date of the Collateral Trust Agreement and (2) created or incurred after the date of the Collateral Trust Agreement to secure Indebtedness of TLGI or LGII which is equally and ratably secured with the Notes and is incurred or assumed in connection with the acquisition or construction of property or assets useful and intended to be used in carrying on the business of TLGI or a Restricted Subsidiary (including without limitation LGII)". 1.4 Sections 5.18(a), (b), (c) and (d) of the Note Agreements shall be and are hereby each amended by inserting the phrase "(together with the related consolidating financial statements, in reasonable detail)" after the phrase "all in reasonable detail" in each such section. 1.5 The following shall be added as a new Section 7.4 of the Note Agreements: "7.4. Release of Barbco Guaranty and Neweol Guaranty. As to each Noteholder and in respect of all obligations and other matters guaranteed thereby, the Barbco Guaranty and the Neweol Guaranty shall thereupon be automatically, forever and irrevocably, released and terminated upon the release and termination of all other guarantees by Barbco and Neweol with respect to any liabilities of TLGI or LGII -2- arising under any Indebtedness of TLGI or LGII. TLGI and LGII shall confirm such release and termination by delivery to each Noteholder of a certification as to the satisfaction of the condition set forth in the preceding sentence. At all times after the effectiveness of such release and termination, TLGI and LGII shall not permit Barbco or Neweol to guaranty any Indebtedness including, without limitation, secured by the Collateral Trust Agreement (other than Class D Secured Indebtedness), unless simultaneously with the entering into of any such guaranty, Barbco and/or Neweol, as appropriate, TLGI and LGII shall execute and deliver to the Noteholders a guaranty in substantially the same form as the Barbco Guaranty or the Neweol Guaranty, as the case may be, with respect to TLGI's and LGII's obligations under this Note Agreement and the Notes and the Noteholders shall have received all such certificates, opinions and showings reasonably requested by the Noteholders in connection with the delivery of such guaranty." 1.6 The following shall be added as a new Section 7.5 of the Note Agreements: "7.5. Release of Trust Agreement Collateral. TLGI and LGII will not permit any release of the liens created or incurred from time to time pursuant to the Collateral Trust Agreement unless all of the following conditions are met: (a) after giving effect to such release, no Default or Event of Default would exist; (b) the Consolidated Net Worth of TLGI is at least U.S. $500,000,000; and (c) the senior Indebtedness of TLGI or LGII are assigned a rating of Baa2 by Moody's Investors Services, or its successors, or BBB by Standard & Poor's Corporation or its successors." 1.7 The following shall be added as a new Section 7.6 of the Note Agreements: "7.6. Ownership of LFW. TLGI will at all times own, directly or indirectly, not less than 100% of the Voting Stock of Loewen Finance (Wyoming) Limited Liability Company ("LFW") free and clear of all Liens, except that such stock may be pledged on May 30, 1996, pursuant to and in accordance with the terms of the Collateral Trust Agreement." 1.8 Section 8.1 of the Note Agreements shall be and is hereby amended by deleting the definition of "Subsidiary" and replacing it with the following definition: "The term "subsidiary" shall mean as to any particular parent Person (a) any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent Person or (b) a partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interest having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding ownership interests of which, shall at the time be so owned or controlled by such parent Person and which is consolidated with such parent Person under GAAP. The term "Subsidiary" shall mean a subsidiary of TLGI." 1.9 The following shall be added as new definitions, in alphabetical order, to Section 8.1 of the Note Agreements: "Class A Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Class B Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Class D Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Collateral Trust Agreement" shall mean that certain Collateral Trust Agreement dated as of May 15, 1996 among TLGI, LGII, certain pledgors referred to therein and Bankers Trust Company, as amended or supplemented from time to time." SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the Noteholders to execute and deliver this Second Amendment (which representations and warranties shall survive the execution and delivery of this Second Amendment), each of TLGI and LGII represents and warrants to the Noteholders that: (a) this Second Amendment has been duly authorized, executed and delivered by it and this Second Amendment constitutes the legal, valid and binding obligation, contract and agreement of TLGI or LGII, as the case may be, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principals relating to or limiting creditors' rights generally; (b) the Note Agreements, as amended by this Second Amendment, constitute the legal, valid and binding obligations, contracts and agreements of TLGI or LGII, as the case may be, enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principals relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, including, without limitation, (w) the Credit Agreement, dated as of May 15, 1996, among TLGI, LGII, the financial institutions listed on the signature pages thereto, Goldman, Sachs & Co. and Bank of Montreal, as Agent, (x) the 1994 MEIP Credit Agreement, dated as of June 14, 1994, among TLGI, Loewen Management Investment Corporation in its capacity as agent for LGII, the financial institutions listed on the signature pages thereto and Wachovia Bank of Georgia, N.A., as Agent, (y) the Operating Credit Agreement, dated for reference August 15, 1994, among TLGI, LGII and Royal Bank of Canada and (z) the Credit Agreement, dated as of January 12, 1995, among TLGI, LGII, Dresdner Bank Canada and, by a transfer certificate dated January 12, 1995, ABN AMRO Bank Canada, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this section 2.1(c); (d) as of the date hereof and after giving effect to this Second Amendment, no Default or Event of Default has occurred which is continuing; and (e) all the representations and warranties contained in Article VI of the Collateral Trust Agreement or delivered with respect to the Collateral Trust Agreement are true and correct in all material respects. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT. 3.1. This Second Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied: (a) executed counterparts of this Second Amendment, duly executed by TLGI, LGII and the holders of at least 66-2/3% of the outstanding principal of the Notes, shall have been delivered to the Noteholders; (b) executed counterparts of the Collateral Trust Agreement, dated as of May 15, 1996, among TLGI, LGII, the subsidiaries listed on Schedule 2 thereto and Bankers Trust Company, as Trustee, duly executed by all parties thereto, shall have been delivered to the Noteholders; (c) the Noteholders shall have received (i) a copy of the resolutions of the Board of Directors of each of TLGI and LGII authorizing the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment, certified by its respective Secretary or Assistant Secretary, and (ii) a copy of the resolutions of the Board of Directors of each TLGI and LGII authorizing execution, delivery and performance by TLGI or LGII, as the case may be, of the Collateral Trust Agreement; (d) the representations and warranties of TLGI and LGII set forth in (S) 2 hereof are true and correct on and with respect to the date hereof; and (e) the Noteholders shall have received the favorable opinion of Russell & DuMoulin and Thelen, Marrin, Johnson & Bridges, counsel to TLGI and LGII as to the matters set forth in (S)(S) 2(a), 2(b) and 2(c) hereof, which opinion shall be in form and substance satisfactory to the Noteholders. Upon receipt of all of the foregoing, this Second Amendment shall become effective. SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES. 4.1 TLGI and LGII agree to pay upon demand, the reasonable fees and expenses of Chapmen and Cutler, counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this Second Amendment and the Collateral Trust Agreement. SECTION 5. MISCELLANEOUS. 5.1 This Second Amendment shall be construed in connection with and as part of each of the Note Agreements, and except as modified and expressly amended by this Second Amendment, all terms, conditions and covenants contained in the Note Agreements and the Notes are hereby ratified and shall be and remain in full force and effect. 5.2 Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Second Amendment may refer to the Note Agreements without making specific reference to this Second Amendment but nevertheless all such references shall include this Second Amendment unless the context otherwise requires. 5.3 The descriptive headings of the various Sections or parts of this Second Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 5.4 This Second Amendment shall be governed by and construed in accordance with New York law. 5.5. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Second Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. THE LOEWEN GROUP INC. By_________________________ Its_______________________ LOEWEN GROUP INTERNATIONAL, INC. By_________________________ Its_______________________ EX-4.30 5 SECOND AMENDMENT TO NOTE AGREEMENT EXHIBIT 4.30 ================================================================================ THE LOEWEN GROUP INC. and LOEWEN GROUP INTERNATIONAL, INC. ------------------------------- SECOND AMENDMENT Dated for reference May 15, 1996 to NOTE AGREEMENTS Dated for reference September 1, 1993 ------------------------------- Re: U.S. $60,000,000 9.62% Senior Guaranteed Notes, Series D, Due September 11, 2003 ================================================================================ SECOND AMENDMENT TO NOTE AGREEMENTS THIS SECOND AMENDMENT, dated for reference May 15, 1996 (the or this "Second Amendment"), to the Note Agreements, each dated for reference September 1, 1993, is among The Loewen Group Inc., a corporation incorporated under the laws of the Province of British Columbia ("TLGI"), Loewen Group International, Inc., a Delaware corporation ("LGII"), and each of the institutions which is signatory to this Second Amendment (collectively, the "Noteholders"). RECITALS: A. TLGI, LGII and each of the Noteholders are parties to the separate and several Note Agreements, each dated for reference September 1, 1993, as amended by the First Amendment to Series D Note Agreement, dated as of June 10, 1994 (collectively, the "Note Agreements"). LGII heretofore issued the U.S. $60,000,000 9.62% Senior Guaranteed Notes, Series D, Due September 11, 2003 (the "Notes"), pursuant to the Note Agreements. The Noteholders are the holders of _____% of the outstanding principal amount of the Notes. B. TLGI, LGII and the Noteholders now desire to amend the Note Agreements in the respects, but only in the respects, hereinafter set forth. C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Agreements unless herein defined or the context shall otherwise require. D. All requirements of law have been fully complied with and all other acts and things necessary to make this Second Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed. NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Second Amendment set forth in Section 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, TLGI, LGII and the Noteholders do hereby agree as follows: Section 1. AMENDMENTS. 1.1 Section 5.6 of the Note Agreements shall be and is hereby amended in its entirety to read as follows: "5.6. Consolidated Net Worth. TLGI will (a) at all times during any period on or before December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than Can. $150,000,000 and (b) at all times during any period after December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than the sum of (i) U.S. $450,000,000 plus (ii) 50% of Consolidated Net Income for any fiscal quarter ending after December 31, 1995 (but only to the extent that, in the case of any such fiscal quarter, Consolidated Net Income for such fiscal quarter is at least $1.00), determined on a cumulative basis." 1.2 Section 5.8 of the Note Agreements shall be and is hereby amended by adding the following new subsection (d): "(d) TLGI and LGII will not permit any Indebtedness to constitute Class A Secured Indebtedness or Class B Secured Indebtedness under the Collateral Trust Agreement other than (1) such Indebtedness which is initial Class A Secured Indebtedness or initial Class B Secured Indebtedness described on Schedule 1 to the Collateral Trust Agreement as of May 30, 1996 and (2) such other Indebtedness which, at the time of designation pursuant to Section 2.5 of the Collateral Trust Agreement, has a weighted average life to maturity less than or equal to 150% and greater than or equal to 50% of the then weighted average life to maturity of (x) the existing Class A Secured Indebtedness or (y) the existing Class B Secured Indebtedness in the case of new Class B Secured Indebtedness." 1.3 Clause (e) of Section 5.9 of the Note Agreements shall be and is hereby amended by deleting the words "including without limitation the Lien of the Trust Deed" and inserting the following phrase in lieu thereof: "and Liens (1) created pursuant to the Collateral Trust Agreement to secure Indebtedness existing on the date of the Collateral Trust Agreement and (2) created or incurred after the date of the Collateral Trust Agreement to secure Indebtedness of TLGI or LGII which is equally and ratably secured with the Notes and is incurred or assumed in connection with the acquisition or construction of property or assets useful and intended to be used in carrying on the business of TLGI or a Restricted Subsidiary (including without limitation LGII)". 1.4 Sections 5.18(a), (b), (c) and (d) of the Note Agreements shall be and are hereby each amended by inserting the phrase "(together with the related consolidating financial statements, in reasonable detail)" after the phrase "all in reasonable detail" in each such section. 1.5 The following shall be added as a new Section 7.4 of the Note Agreements: "7.4 Release of Barbco Guaranty and Neweol Guaranty. As to each Noteholder and in respect of all obligations and other matters guaranteed thereby, the Barbco Guaranty and the Neweol Guaranty shall thereupon be automatically, forever and irrevocably, released and terminated upon the release and termination of all other guarantees by Barbco and Neweol with respect to any liabilities of TLGI or LGII arising under any Indebtedness of TLGI or LGII. TLGI and LGII shall confirm such release and termination by delivery to each Noteholder of a certification as to the release and termination by delivery to each Noteholder of a certification as to the satisfaction of the condition set forth in the preceding sentence. At all times after the effectiveness of such release and termination, TLGI and LGII shall not permit Barbco -2- or Neweol to guaranty any Indebtedness including, without limitation, secured by the Collateral Trust Agreement (other than Class D Secured Indebtedness), unless simultaneously with the entering into of any such guaranty, Barbco and/or Neweol, as appropriate, TLGI and LGII shall execute and deliver to the Noteholders a guaranty in substantially the same form as the Barbco Guaranty or the Neweol Guaranty, as the case may be, with respect to TLGI's and LGII's obligations under this Note Agreement and the Notes and the Noteholders shall have received all such certificates, opinions and showings reasonably requested by the Noteholders in connection with the delivery of such guaranty." 1.6 The following shall be added as a new Section 7.5 of the Note Agreements: "7.5 Release of Trust Agreement Collateral. TLGI and LGII will not permit any release of the liens created or incurred form time to time pursuant to the Collateral Trust Agreement unless all of the following conditions are met: (a) after giving effect to such release, no Default or Event of Default would exist; (b) the Consolidated Net Worth of TLGI is at least U.S. $500,000,000; and (c) the senior Indebtedness of TLGI or LGII are assigned a rating of Baa2 by Moody's Investors Services, or its successors, or BBB by Standard & Poor's Corporation or its successors." 1.7 The following shall be added as a new Section 7.6 of the Note Agreements: "7.6. Ownership of LFW. TLGI will at all times own, directly or indirectly, not less than 100% of the Voting Stock of Loewen Finance (Wyoming) Limited Liability Company ("LFW") free and clear of all Liens, except that such stock may be pledged on May 30, 1996, pursuant to and in accordance with the terms of the Collateral Trust Agreement." 1.8 Section 8.1 of the Note Agreements shall be and is hereby amended by deleting the definition of "Subsidiary" and replacing it with the following definition: "The term "subsidiary" shall mean as to any particular parent Person (a) any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent Person or (b) a partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interest having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding ownership interests of which, shall at the time be so owned or controlled by such parent Person and which is consolidated with -3- such parent Person under GAAP. The "Subsidiary" shall mean a subsidiary of TLGI." 1.9 The following shall be added as new definitions, in alphabetical order, to Section 8.1 of the Note Agreements: ""Class A Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Class B Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Class D Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Collateral Trust Agreement" shall mean that certain Collateral Trust Agreement dated as of May 15, 1996 among TLGI, LGII, certain pledgors referred to therein and Bankers Trust Company, as amended or supplemented from time to time." SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the Noteholders to execute and deliver this Second Amendment (which representations and warranties shall survive the execution and delivery of this Second Amendment), each of TLGI and LGII represents and warrants to the Noteholders that: (a) this Second Amendment has been duly authorized, executed and delivered by it and this Second Amendment constitutes the legal, valid and binding obligation, contract and agreement of TLGI or LGII, as the case may be, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Note Agreements, as amended by this Second Amendment, constitute the legal, valid and binding obligations, contracts and agreements of TLGI or LGII, as the case may be, enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order -4- of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, including, without limitation, (w) the Credit Agreement, dated as of May 15, 1996, among TLGI, LGII, the financial institutions listed on the signature pages thereto, Goldman, Sachs & Co. and Bank of Montreal, as Agent, (x) the 1994 MEIP Credit Agreement, dated as of June 14, 1994, among TLGI, Loewen Management Investment Corporation in its capacity as agent for LGII, the financial institutions listed on the signature pages thereto and Wachovia Bank of Georgia, N.A., as Agent, (y) the Operating Credit Agreement, dated for reference August 15, 1994, among TLGI, LGII and Royal Bank of Canada and (z) the Credit Agreement, dated as of January 12, 1995, among TLGI, LGII, Dresdner Bank Canada and, by a transfer certificate dated January 12, 1995, ABN AMRO Bank Canada, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this (S) 2.1(c); (d) as of the date hereof and after giving effect to this Second Amendment, no Default or Event of Default has occurred which is continuing; and (e) all the representations and warranties contained in Article VI of the Collateral Trust Agreement or delivered with respect to the Collateral Trust Agreement are true and correct in all material respects. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT. 3.1. This Second Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied: (a) executed counterparts of this Second Amendment, duly executed by TLGI, LGII and the holders of at least 66-2/3% of the outstanding principal of the Notes, shall have been delivered to the Noteholders; (b) executed counterparts of the Collateral Trust Agreement, dated as of May 15, 1996, among TLGI, LGII, the subsidiaries listed on Schedule 2 thereto and Bankers Trust Company, as Trustee, duly executed by all parties thereto, shall have been delivered to the Noteholders; (c) the Noteholders shall have received (i) a copy of the resolutions of the Board of Directors of each of TLGI and LGII authorizing the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment, certified by its respective Secretary or Assistant Secretary, and (ii) a copy of the resolutions of the Board of Directors of each of TLGI and LGII authorizing execution, delivery and performance by TLGI or LGII, as the case may be, of the Collateral Trust Agreement; -5- (d) the representations and warranties of TLGI and LGII set forth in (S) 2 hereof are true and correct on and with respect to the date hereof; and (e) the Noteholders shall have received the favorable opinion of Russell & DuMoulin and Thelen, Marrin, Johnson & Bridges, counsel to TLGI and LGII as to the matters set forth in (S)(S) 2(a), 2(b) and 2(c) hereof, which opinion shall be in form and substance satisfactory to the Noteholders. Upon receipt of all of the foregoing, this Second Amendment shall become effective. SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES. 4.1. TLGI and LGII agree to pay upon demand, the reasonable fees and expenses of Chapman and Cutler, counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this Second Amendment and the Collateral Trust Agreement. SECTION 5. MISCELLANEOUS 5.1. This Second Amendment shall be construed in connection with and as part of each of the Note Agreements, and except as modified and expressly amended by this Second Amendment, all terms, conditions and covenants contained in the Note Agreements and the Notes are hereby ratified and shall be and remain in full force and effect. 5.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Second Amendment may refer to the Note Agreements without making specific reference to this Second Amendment but nevertheless all such references shall include this Second Amendment unless the context otherwise requires. 5.3. The descriptive headings of the various Sections or parts of this Second Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 5.4. This Second Amendment shall be governed by and construed in accordance with New York law. -6- 5.5. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Second Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. THE LOEWEN GROUP INC. By________________________ Its_____________________ LOEWEN GROUP INTERNATIONAL, INC. By_______________________ Its____________________ EX-4.31 6 SECOND AMENDMENT TO NOTE AGREEMENT EXHIBIT 4.31 =============================================================================== THE LOEWEN GROUP INC. and LOEWEN GROUP INTERNATIONAL, INC. ------------------------------- SECOND AMENDMENT Dated for reference May 15, 1996 to NOTE AGREEMENT Dated for reference February 1, 1994 ------------------------------- Re: U.S. $50,000,000 6.49% Senior Guaranteed Notes, Series E, Due February 25, 2004 =============================================================================== SECOND AMENDMENT TO NOTE AGREEMENT THIS SECOND AMENDMENT, dated for reference May 15, 1996 (the or this "Second Amendment"), to the Note Agreement, dated for reference February 1, 1994, is among the Loewen Group Inc., a corporation incorporated under the laws of the Province of British Columbia ("TLGI"), Loewen Group International, Inc., a Delaware corporation ("LGII"), and Teachers Insurance and Annuity Association of America (the "Noteholder"). RECITALS: A. TLGI, LGII and the Noteholder are parties to the Note Agreement, dated for reference February 1, 1994, as amended by the First Amendment to Series E Note Agreement, dated as of June 10, 1994 (the "Note Agreement"). LGII heretofore issued the U.S. $50,000,000 6.49% Senior Guaranteed Notes, Series E, Due February 25, 2004 (the "Notes"), pursuant to the Note Agreement. The Noteholder is the holder of 100% of the outstanding principal amount of the Notes. B. TLGI, LGII and the Noteholder now desire to amend the Note Agreement in the respects, but only in the respects, hereinafter set forth. C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Agreement unless herein defined or the context shall otherwise require. D. All requirements of law have been fully complied with and all other acts and things necessary to make this Second Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed. NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Second Amendment set forth in (S) 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, TLGI, LGII and the Noteholder do hereby agree as follows: SECTION 1. AMENDMENTS. 1.1. Section 5.6 of the Note Agreement shall be and is hereby amended in its entirety to read as follows: "5.6. Consolidated Net Worth. TLGI will (a) at all times during any period on or before December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than Can. $150,000,000 and (b) at all times during any period after December 31, 1995, keep and maintain Consolidated Net Worth at an amount not less than the sum of (i) U.S. $450,000,000 plus (ii) 50% of Consolidated Net Income for any fiscal quarter ending after December 31, 1995 (but only to the extent that, in the case of any such fiscal quarter, Consolidated Net Income for such fiscal quarter is at least $1.00), determined on a cumulative basis." 1.2 Section 5.8 of the Note Agreement shall be and is hereby amended by adding the following new subsection (d): "(d) TLGI and LGII will not permit any Indebtedness to constitute Class A Secured Indebtedness or Class B Secured Indebtedness under the Collateral Trust Agreement other than (1) such Indebtedness which is initial Class A Secured Indebtedness or initial Class B Secured Indebtedness described on Schedule 1 to the Collateral Trust Agreement as of May 30, 1996 and (2) such other Indebtedness which, at the time of designation pursuant to Section 2.5 of the Collateral Trust Agreement, has a weighted average life to maturity less than or equal to 150% and greater than or equal to 50% of the then weighted average life to maturity of (x) the existing Class A Secured Indebtedness in the case of new Class A Secured Indebtedness or (y) the existing Class B Secured Indebtedness in the case of new Class B Secured Indebtedness." 1.3 Clause (e) of Section 5.9 of the Note Agreement shall be and is hereby amended by adding the following phrase at the end thereof after the word "Agreement": "and Liens (1) created pursuant to the Collateral Trust Agreement to secure Indebtedness existing on the date of the Collateral Trust Agreement and (2) created or incurred after the date of the Collateral Trust Agreement to secure Indebtedness of TLGI or LGII which is equally and ratably secured with the Notes and is incurred or assumed in connection with the acquisition or construction of property or assets useful and intended to be used in carrying on the business of TLGI or a Restricted Subsidiary (including without limitation LGII)". 1.4 Sections 5.18(a), (b), (c) and (d) of the Note Agreement shall be and are hereby each amended by inserting the phrase "(together with the related consolidating financial statements, in reasonable detail)" after the phrase "all in reasonable detail" in each such section. 1.5 The following shall be added as a new Section 7.4 of the Note Agreement: "7.4. Release of Barbco Guaranty and Neweol Guaranty. As to each Noteholder and in respect of all obligations and other matters guaranteed thereby, the Barbco Guaranty and the Neweol Guaranty shall thereupon be automatically, forever and irrevocably, released and terminated upon the release and termination of all other guarantees by Barbco and Neweol with respect to any liabilities of TLGI or LGII arising under any Indebtedness of TLGI or LGII. TLGI and LGII shall confirm such release and termination by delivery to each Noteholder of a certification as to the satisfaction of the condition set forth in the preceding sentence. At all times after the effectiveness of such release and termination, TLGI and LGII shall not permit Barbco or Neweol to guaranty any Indebtedness including, without limitation, secured by the Collateral Trust Agreement (other than Class D Secured Indebtedness), unless simultaneously with the entering into of any such guaranty, Barbco and/or Neweol, as appropriate, TLGI and LGII shall execute and deliver to the Noteholders a guaranty -2- in substantially the same form as the Barbco Guaranty or the Neweol Guaranty, as the case may be, with respect to TLGI's and LGII's obligations under this Note Agreement and the Notes and the Noteholders shall have received all such certificates, opinions and showings reasonably requested by the Noteholders in connection with the delivery of such guaranty." 1.6 The following shall be added as a new Section 7.5 of the Note Agreement: "7.5. Release of Trust Agreement Collateral. TLGI and LGII will not permit any release of the liens created or incurred form time to time pursuant to the Collateral Trust Agreement unless all of the following conditions are met: (a) after giving effect to such release, no Default or Event of Default would exist; (b) the Consolidated Net Worth of TLGI is at least U.S. $500,000,000; and (c) the senior Indebtedness of TLGI or LGII are assigned a rating of Baa2 by Moody's Investors Services, or its successors, or BBB by Standard & Poor's Corporation or its successors." 1.7 The following shall be added as a new Section 7.6 of the Note Agreement: "7.6. Ownership of LFW. TLGI will at all times own, directly or indirectly, not less than 100% of the Voting Stock of Loewen Finance (Wyoming) Limited Liability Company ("LFW") free and clear of all Liens, except that such stock may be pledged on May 30, 1996, pursuant to and in accordance with the terms of the Collateral Trust Agreement." 1.8 Section 8.1 of the Note Agreement shall be and is hereby amended by deleting the definition of "Subsidiary" and replacing it with the following definition: "The term "subsidiary" shall mean as to any particular parent Person (a) any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent Person or (b) a partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interest having ordinary voting power of which, or more than 50% of the economic benefits associated with all outstanding ownership interests of which, shall at the time be so owned or controlled by such parent Person and which is consolidated with such parent Person under GAAP. The term "Subsidiary" shall mean a subsidiary of TLGI." 1.9 The following shall be added as new definitions, in alphabetical order, to Section 8.1 of the Note Agreement: -3- ""Class A Secured Indebtedness" shall have the meaning assigned in the Collateral Trust Agreement. "Class B Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Class D Secured Indebtedness" shall have the meaning assigned thereto in the Collateral Trust Agreement. "Collateral Trust Agreement" shall mean that certain Collateral Trust Agreement dated as of May 15, 1996 among TLGI, LGII, certain pledgors referred to therein and Bankers Trust Company, as amended or supplemented from time to time." SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the Noteholder to execute and deliver this Second Amendment (which representations and warranties shall survive the execution and delivery of this Second Amendment), each of TLGI and LGII represents and warrants to the Noteholder that: (a) this Second Amendment has been duly authorized, executed and delivered by it and this Second Amendment constitutes the legal, valid and binding obligation, contract and agreement of TLGI or LGII, as the case may be, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Note Agreement, as amended by this Second Amendment, constitutes the legal, valid and binding obligation, contract and agreement of TLGI or LGII, as the case may be, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, including, without limitation, (w) the Credit Agreement, dated as of May 15, 1996, among TLGI, LGII, the financial institutions listed on the signature pages thereto, Goldman, Sachs & Co. and Bank of Montreal, as Agent, (x) the 1994 MEIP Credit Agreement, dated as of June 14, 1994, among TLGI, Loewen Management Investment Corporation in its capacity as agent for LGII, the financial institutions listed on the signature pages thereto and Wachovia Bank of Georgia, N.A., as Agent, (y) the Operating Credit Agreement, dated for reference August 15, 1994, among TLGI, LGII and Royal Bank of Canada and (z) the Credit Agreement, dated as of January 12, 1995, among TLGI, LGII, Dresdner Bank Canada and, by a transfer certificate dated January 12, 1995, ABN AMRO Bank Canada, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this (S) 2.1(c); (d) as of the date hereof and after giving effect to this Second Amendment, no Default or Event of Default has occurred which is continuing; and (e) all the representations and warranties contained in Article VI of the Collateral Trust Agreement or delivered with respect to the Collateral Trust Agreement are true and correct in all material respects. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT. 3.1 This Second Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied: (a) executed counterparts of this Second Amendment, duly executed by TLGI and LGII shall have been delivered to the Noteholder; (b) executed counterparts of the Collateral Trust Agreement, dated as of May 15, 1996, among TLGI, LGII, the subsidiaries listed on Schedule 2 thereto and Bankers Trust Company, as Trustee, duly executed by all parties thereto, shall have been delivered to the Noteholder. (c) the Noteholder shall have received (i) a copy of the resolutions of the Board of Directors of each of TLGI and LGII authorizing the execution, delivery and performance by TLGI or LGII, as the case may be, of this Second Amendment, certified by its respective Secretary or Assistant Secretary, and (ii) a copy of the resolutions of the Board of Directors of each of TLGI and LGII authorizing execution, delivery and performance by TLGI or LGII, as the case may be, of the Collateral Trust Agreement; (d) the representations and warranties of TLGI and LGII set forth in (S) 2 hereof are true and correct on and with respect to the date hereof; and (e) the Noteholder shall have received the favorable opinion of Russell & DuMoulin and Thelen, Marrin, Johnson & Bridges, counsel to TLGI and LGII as to the matters set forth in (S)(S) 2(a), 2(b) and 2(c) hereof, which opinion shall be in form and substance satisfactory to the Noteholder. -5- Upon receipt of all of the foregoing, this Second Amendment shall become effective. SECTION 4. PAYMENT OF NOTEHOLDER' COUNSEL FEES AND EXPENSES. 4.1. TLGI and LGII agree to pay upon demand, the reasonable fees and expenses of Chapman and Cutler, counsel to the Noteholder, in connection with the negotiation, preparation, approval, execution and delivery of this Second Amendment and the Collateral Trust Agreement. SECTION 5. MISCELLANEOUS. 5.1. This Second Amendment shall be construed in connection with and as part of the Note Agreement, and except as modified and expressly amended by this Second Amendment, all terms, conditions and covenants contained in the Note Agreement and the Notes are hereby ratified and shall be and remain in full force and effect. 5.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Second Amendment may refer to the Note Agreement without making specific reference to this Second Amendment but nevertheless all such references shall include this Second Amendment unless the context otherwise requires. 5.3. The descriptive headings of the various Sections or parts of this Second Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 5.4. This Second Amendment shall be governed by and construed in accordance with New York law. -6- 5.5 The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Second Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. THE LOEWEN GROUP, INC. By____________________________________ Its_________________________________ LOEWEN GROUP INTERNATIONAL, INC. By____________________________________ Its_________________________________ EX-12.1 7 COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO EXHIBIT 12.1 THE LOEWEN GROUP INC. COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO CANADIAN GAAP (IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
FOR THE QUARTER ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31, --------------------- ------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ----------- ---------- --------- ------- ------- ------- ------- Earnings (loss) before income taxes........... $ 24,961 $ 21,587 $(123,862) $58,232 $43,896 $31,480 $24,140 Fixed charges included in earnings (loss) be- fore income taxes: Interest on long-term debt................. 18,488 11,361 50,913 34,203 21,801 19,083 14,913 Amortization of deferred finance costs................ 326 402 1,512 1,139 832 580 433 Dividends on preferred securities of subsid- iary................. 1,772 1,772 7,088 2,678 -- -- -- ----------- ---------- --------- ------- ------- ------- ------- 20,586 13,535 59,513 38,020 22,633 19,663 15,346 ----------- ---------- --------- ------- ------- ------- ------- Earnings (loss)......... $ 45,547 $ 35,122 $ (64,349) $96,252 $66,529 $51,143 $39,486 =========== ========== ========= ======= ======= ======= ======= Fixed charges: Fixed charges included in earnings before income taxes......... $ 20,586 $ 13,535 $ 59,513 $38,020 $22,633 $19,663 $15,346 Capitalized interest.. 585 168 2,722 1,128 117 -- -- ----------- ---------- --------- ------- ------- ------- ------- Total fixed charges..... $ 21,171 $ 13,703 $ 62,235 $39,148 $22,750 $19,663 $15,346 =========== ========== ========= ======= ======= ======= ======= Ratio of earnings to fixed charges (1)...... 2.2x 2.6x -- 2.5x 2.9x 2.6x 2.6x =========== ========== ========= ======= ======= ======= =======
- -------- (1) The 1995 loss is not sufficient to cover fixed charges by a total of $126,584, and as such the ratio of earnings to fixed charges has not been computed. EX-12.2 8 COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO EXHIBIT 12.2 THE LOEWEN GROUP INC. COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO U.S. GAAP (IN THOUSANDS OF U.S. DOLLARS, EXCEPT RATIOS)
FOR THE QUARTER ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31, --------------------- ------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ---------- ---------- --------- ------- ------- ------- ------- Earnings (loss) before income taxes........... $ 24,201 $ 21,284 $(125,539) $57,877 $44,374 $33,964 $26,634 Fixed charges included in earnings (loss) be- fore income taxes: Interest on long-term debt................. $ 18,488 $ 11,361 $ 50,913 $34,203 $22,337 $20,874 $17,058 Amortization of de- ferred finance costs. 326 402 1,512 1,139 852 634 495 Dividends on preferred securities of subsid- iary................. 1,772 1,772 7,088 2,678 -- -- -- ---------- ---------- --------- ------- ------- ------- ------- 20,586 13,535 59,513 38,020 23,189 21,508 17,553 ---------- ---------- --------- ------- ------- ------- ------- Earnings (loss)......... $ 44,787 $ 34,819 $ (66,026) $95,897 $67,563 $55,472 $44,187 ========== ========== ========= ======= ======= ======= ======= Fixed charges: Fixed charges included in earnings before income taxes......... $ 20,586 $ 13,535 $ 59,513 $38,020 $23,189 $21,508 $17,553 Capitalized interest.. 585 168 2,722 1,128 120 -- -- ---------- ---------- --------- ------- ------- ------- ------- Total fixed charges..... $ 21,171 $ 13,703 $ 62,235 $39,148 $23,309 $21,508 $17,553 ========== ========== ========= ======= ======= ======= ======= Ratio of earnings to fixed charges (1)...... 2.1x 2.5x -- 2.4x 2.9x 2.6x 2.5x ========== ========== ========= ======= ======= ======= =======
- -------- (1) The 1995 loss is not sufficient to cover fixed charges by a total of $128,261, and as such the ratio of earnings to fixed charges has not been computed. EX-23.3 9 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS The Board of Directors The Loewen Group Inc. We consent to the use of our report, dated February 26, 1996, except as to Note 12(b), which is as of March 19, 1996 and Note 20, which is as of March 26, 1996, relating to the consolidated balance sheets of The Loewen Group Inc. as at December 31, 1995 and 1994, and the related consolidated statements of operations, retained earnings, and changes in financial position for each of the years in the three year period ended December 31, 1995, and related schedule, which report is incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG PEAT MARWICK THORNE - ---------------------------- KPMG PEAT MARWICK THORNE Chartered Accountants Vancouver, Canada June 19, 1996 EX-99.1 10 LETTER OF TRANSMITTAL EXHIBIT 99.1 LOEWEN GROUP INTERNATIONAL, INC. LETTER OF TRANSMITTAL Offer to Exchange 7 1/2% Series 3 Senior Guaranteed Notes due 2001 for Any and All Outstanding 7 1/2% Series 1 Senior Guaranteed Notes due 2001 and 8 1/4% Series 4 Senior Guaranteed Notes due 2003 for Any and All Outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003 Guaranteed By The Loewen Group Inc. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME ON _________ __, 1996 (THE "EXPIRATION DATE") UNLESS EXTENDED BY LOEWEN GROUP INTERNATIONAL, INC. EXCHANGE AGENT: FLEET NATIONAL BANK By Registered or Certified By Hand: By Facsimile: Mail or Courier: Fleet National Bank (860) 986-7908 Fleet National Bank Corporate Trust Operations (For Eligible Institutions Corporate Trust Operations 777 Main Street, Lower Level Only) 777 Main Street, Lower Level Hartford, Connecticut 06115 CTMO 0224 Attn: Patricia Williams Confirm by Telephone: Hartford, Connecticut 06115 (860) 986-1271 Attn: Patricia Williams
Delivery of this Letter of Transmittal to an address other than as set forth above or transmission via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. --------------------------------- PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. --------------------------------- A. Acknowledgements, Representations and General Information The undersigned acknowledges receipt of the Prospectus dated _____________ __, 1996 (the "Prospectus") of Loewen Group International, Inc. ("LGII") and The Loewen Group Inc. ("Loewen") which, together with this Letter of Transmittal (the "Letter of Transmittal"), describes LGII's offer (the "Exchange Offer") to exchange its (i) $225,000,000 7 1/2% Series 3 Senior Guaranteed Notes due 2001 (the "Series 3 Notes") for a like principal amount of its issued and outstanding 7 1/2% Series 1 Senior Guaranteed Notes due 2001 (the "Series 1 Notes"), and (ii) $125,000,000 8 1/4% Series 4 Senior Guaranteed Notes due 2003 (the "Series 4 Notes") for a like principal amount of its issued and outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003 (the "Series 2 Notes"). The terms of the Series 3 Notes and the Series 4 Notes (collectively, the "Exchange Notes") are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Series 1 Notes and the Series 2 Notes (collectively, the "Outstanding Notes") for which they may be exchanged pursuant to the Exchange Offer, except that the offering of the Exchange Notes will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and will not provide for certain registration rights. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to LGII the principal amount of Outstanding Notes as set forth in Section B below. Subject to, and effective upon, the acceptance for exchange of the Outstanding Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, LGII all right, title and interest in and to such Outstanding Notes. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the undersigned in connection with the Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Outstanding Notes, and that, when the same are accepted for exchange, LGII will acquire good and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or LGII to be necessary or desirable to complete the exchange, assignment and transfer of tendered Outstanding Notes or transfer ownership of such Outstanding Notes on the account books maintained by the Depository Trust Company ("DTC"). The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, LGII), as more particularly set forth in the Prospectus, LGII may not be required to exchange any of the Outstanding Notes tendered hereby -2- and, in such event, the Outstanding Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. The offer is not conditioned upon any minimum number of Outstanding Notes being tendered. Pursuant to the Letter of Transmittal, each holder of Outstanding Notes will represent to LGII that (i) the Exchange Notes to be acquired in the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of the Outstanding Notes nor any such other person is engaged in, intends to participate in or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes and (iii) neither the holder nor any such other person is an "affiliate" of LGII or Loewen within the meaning of Rule 405 under the Securities Act. A tendering holder that is a broker-dealer may participate in the Exchange Offer provided that (i) such broker-dealer will receive Exchange Notes for its own account in exchange for Outstanding Notes as a result of market-making activities or other trading activities and (ii) such broker-dealer will acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Outstanding Notes pursuant to the Exchange Offer. Additionally, by acknowledging that such broker-dealer will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The enclosed Instruction by Owner to Registered Holder and/or Book- Entry Transfer Participant contains an authorization by the beneficial owners of the Outstanding Notes for you to make the foregoing representations. LGII will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Outstanding Notes pursuant to the Offer. LGII will pay or cause to be paid any transfer taxes payable on the transfer of Outstanding Notes to it, except as otherwise provided in Instruction 5 of the enclosed Letter of Transmittal. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF LOEWEN GROUP INTERNATIONAL, INC. OR FLEET NATIONAL BANK OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. Additional copies of the enclosed material may be obtained from the Exchange Agent. -3- All authority herein conferred or agreed to be conferred shall survive the death, bankruptcy or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Outstanding Notes may be withdrawn at any time prior to the Expiration Date. Certificates for all Exchange Notes delivered in exchange for tendered Outstanding Notes and any Outstanding Notes delivered herewith but not exchanged, in each case registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. This Letter of Transmittal is to be used either if certificates for Outstanding Notes are to be forwarded herewith or if delivery of Outstanding Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at DTC pursuant to the procedures set forth in "Procedures for Tendering" in the Prospectus. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. Unless the context requires otherwise, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Outstanding Notes are registered on the books of LGII or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Notes are held of record by DTC who desires to deliver such Outstanding Notes by book-entry transfer at DTC. Holders whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date may tender their Outstanding Notes according to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." -4- B. Outstanding Notes to be Tendered List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Principal Amounts should be listed on a separate signed schedule affixed hereto.
- ----------------------------------------------------------------------------------------- DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH - ----------------------------------------------------------------------------------------- Aggregate Principal Amount Principal Names(s) and Address(es) of Registered Certificate Represented Amount Holder (s) (Please fill in) Number(s)* by Notes* Tendered** $ $ - ----------------------------------------------------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- Total $ $ ========= ========= - ----------------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by Outstanding Notes. See Instruction 2. - -----------------------------------------------------------------------------------------
-5- C. Method of Delivery [_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING: Name of Tendering Institution:____________________________________________ The Depository Trust Company Account Number:___________________________________________________________ Transaction Code Number:__________________________________________________ [_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s):_____________________________________________ Name of Eligible Institution that Guaranteed Delivery:______________________________________________________ IF DELIVERED BY BOOK-ENTRY TRANSFER: Account Number:___________________________________________________________ [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:_____________________________________________________________________ Address:__________________________________________________________________ [_] CHECK HERE IF TENDERED NOTES ARE ENCLOSED HEREWITH. -6- D. SIGNATURES TENDERING HOLDER(S) SIGN HERE _______________________________________________________________________________ _______________________________________________________________________________ Signature(s) of Holder(s) Dated:__________________________, 1996 (Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Outstanding Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith or, if the Outstanding Notes are held of record by DTC, the person in whose name such Outstanding Notes are registered on the books of DTC. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person.) See Instruction 3. Name(s):_______________________________________________________________________ _______________________________________________________________________________ (Please Print) Capacity (full title):_________________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ (Including Zip Code) Area Code and Telephone No.:___________________________________________________ Tax Identification No.:________________________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTION 3) Authorized Signature:__________________________________________________________ Name:__________________________________________________________________________ Title:_________________________________________________________________________ Address:_______________________________________________________________________ Name of Firm:__________________________________________________________________ Area Code and Telephone No.:___________________________________________________ Dated:__________________________, 1996 -7- E. INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all physically delivered Outstanding Notes or confirmation of any book-entry transfer to the Exchange Agent's account at The Depository Trust Company of Outstanding Notes tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addressee set forth herein on or prior to the Expiration Date. THE METHOD OF DELIVERY OF THIS TRANSMITTAL, THE OUTSTANDING NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO LGII OR LOEWEN. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Holders whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis may tender their Outstanding Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender must be made through an Eligible Institution (as defined therein); (ii) prior to the Expiration Date, the Exchange Agent must have received from such Eligible institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the tendering holder, the registered number(s) of such Outstanding Notes and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that, within (3) three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (iii) all tendered Outstanding Notes (or a confirmation of any book-entry transfer of such Outstanding Notes into the Exchange Agent's account at DTC) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal must be received by the Exchange Agent within three (3) New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." -8- Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Outstanding Notes according to the guaranteed delivery procedures set forth above. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Notes for exchange. 2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Outstanding Notes will be accepted in all denominations of $1,000 and integral multiples in excess thereof. If less than the entire principal amount of Outstanding Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the principal amount tendered in the box entitled "Principal Amount Tendered." A newly issued certificate for the principal amount of Outstanding Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Tenders of Outstanding Notes pursuant to the Exchange Offer are irrevocable, except that Outstanding Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m., New York Time, on the Expiration Date. To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent. Any such notice of withdrawal must specify the name of the person having tendered the Outstanding Notes to be withdrawn, identify the Outstanding Notes to be withdrawn (including the principal amount of such Outstanding Notes), and (where certificates for Outstanding Notes have been transmitted) specify the name in which such Outstanding Notes were registered, if different from that of the withdrawing holder. If certificates for Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Outstanding Notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Outstanding Notes and otherwise comply with the procedures of such facility. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes that have been tendered for exchange but that are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the Book- Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Outstanding Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" at any time on or prior to the Expiration Date. -9- 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Outstanding Notes tendered hereby, the signature must correspond with the name(s) as written on the face of certificates without alteration, enlargement or any change whatsoever. If any of the Outstanding Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Outstanding Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Outstanding Notes. When this Letter of Transmittal is signed by the registered holder or holders of Outstanding Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Outstanding Notes listed, such Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to LGII and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Outstanding Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by LGII, proper evidence satisfactory to LGII of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Outstanding Notes are tendered: (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of any Eligible Institution. See Instruction 4 below. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable spaces, the name and address to which the Exchange Notes or substitute Outstanding Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of the Outstanding Notes through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. -10- 5. TRANSFER TAXES. LGII will pay all transfer taxes, if any, applicable to the transfer and exchange of Outstanding Notes to it or its order pursuant to the Exchange Offer. If, however, certificates representing Outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Outstanding Notes to LGII or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith with the Letter of Transmittal the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Notes listed in this Letter of Transmittal. 6. WAIVER OF CONDITIONS. LGII reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any holder whose Outstanding Notes have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated below for further instructions. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth on the front page of this Letter of Transmittal. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to Martin Carsky at The Loewen Group Inc., 4126 Norland Avenue, Burnaby, British Columbia V5G 3S8; telephone 604-293- 6486; facsimile: 604-473-7305. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Outstanding Notes will be resolved by LGII, whose determination will be final and binding. LGII reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of LGII's counsel, be unlawful. LGII also reserves the right to waive any irregularities or conditions of tender as to the particular Outstanding Notes covered by any Letter of Transmittal or tendered pursuant to such letter. None of LGII, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. LGII's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as LGII shall determine. Although LGII intends to notify holders of defects or irregularities with respect to tenders of Outstanding Notes, neither LGII, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such -11- defects or irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and not otherwise defined have the meanings given in the Prospectus. SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 1, 3, (SEE INSTRUCTION 1, 3, AND 4 HEREIN) AND 4 HEREIN) To be completed ONLY if To be completed ONLY if certificates for Outstanding Notes in certificates for Outstanding Notes in a principal amount not tendered are to a principal amount not tendered are be issued in the name of, or the not accepted for purchase or the Exchange Notes issued pursuant to the Exchange Notes issued pursuant to the Exchange Offer are to be issued to the Exchange Offer are to be sent to order of, someone other than the someone other than the person or person or persons whose signature(s) persons whose signature(s) appear(s) appear(s) within this Letter of within this Letter of Transmittal or Transmittal or issued to an address issued to an address different from different from that shown in the box that shown in the box entitled entitled "Description of Outstanding "Description of Outstanding Notes Notes Tendered Herewith" within this Tendered Herewith" within this Letter Letter of Transmittal, or if of Transmittal. Outstanding Notes tendered by book- entry transfer that are not accepted for purchase are to be credited to an account maintained at DTC. Name_________________________________ Name_________________________________ (Please Print) (Please Print) Address______________________________ Address______________________________ (Please Print) (Please Print) _____________________________________ _____________________________________ (Zip Code) (Zip Code) _____________________________________ _____________________________________ Taxpayer Identification or Taxpayer Identification or Social Security Number Social Security Number ------------------------------- IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE. ------------------------------- -12- EX-99.2 11 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 LOEWEN GROUP INTERNATIONAL, INC. NOTICE OF GUARANTEED DELIVERY OFFER TO EXCHANGE 7 1/2% SERIES 3 SENIOR GUARANTEED NOTES DUE 2001 FOR ANY AND ALL OUTSTANDING 7 1/2% SERIES 1 SENIOR GUARANTEED NOTES DUE 2001 AND 8 1/4% SERIES 4 SENIOR GUARANTEED NOTES DUE 2003 FOR ANY AND ALL OUTSTANDING 8 1/4% SERIES 2 SENIOR GUARANTEED NOTES DUE 2003 GUARANTEED BY THE LOEWEN GROUP, INC. Registered holders of (i) outstanding 7 1/2% Series 1 Senior Guaranteed Notes due 2001 ("Series 1 Notes") who wish to tender their Series 1 Notes in exchange for a like principal amount of 7 1/2% Series 3 Senior Guaranteed Notes due 2001 and/or (ii) outstanding 8 1/4% Series 2 Senior Guaranteed Notes due 2003 ("Series 2 Notes" and, together with the Series 1 Notes, the "Outstanding Notes") who wish to tender their Series 2 Notes for a like principal amount of 8 1/4% Series 4 Senior Guaranteed Notes due 2003, in each case whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Fleet National Bank (the "Exchange Agent") prior to 5:00 p.m. New York time on the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight delivery) or mail to the Exchange Agent. See "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The Exchange Agent for the Exchange Offer is: FLEET NATIONAL BANK By Registered or Certified By Hand: By Facsimile: Mail or Courier: Fleet National Bank (860) 986-7908 Fleet National Bank Corporate Trust Operations (For Eligible Institutions Corporate Trust Operations 777 Main Street, Lower Level Only) 777 Main Street, Lower Level Hartford, Connecticut 06115 CTMO 0224 Attention: Patricia Williams Confirm by Telephone: Hartford, Connecticut 06115 (860) 986-1271 Attention: Patricia Williams
Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch, agency or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the certificates representing the Outstanding Notes, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three (3) New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm:_______________________ _____________________________________ (Authorized Signature) Address:____________________________ Title:_______________________________ ____________________________________ Name:________________________________ (Including Zip Code) (Please type or print) Telephone Number:___________________ Date:________________________________ (Including Area Code) NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL -2- -----END PRIVACY-ENHANCED MESSAGE-----