IN THE MATTER OF THE SECURITIES
LEGISLATION OF BRITISH COLUMBIA,
SASKATCHEWAN, MANITOBA, ONTARIO, Qu�bec, NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA,
PRINCE EDWARD ISLAND, NEW BRUNSWICK, THE NORTHWEST TERRITORIES, THE YUKON TERRITORY
AND THE
TERRITORY OF NUNAVUT
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF LOEWEN GROUP INTERNATIONAL, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory
authority
or regulator (the "Decision Maker" and collectively, the "Decision
Makers") in each of the provinces of British Columbia, Saskatchewan, Manitoba,
Ontario, Qu�bec, Newfoundland, Nova Scotia, Prince Edward Island, New Brunswick,
Northwest Territories, the Yukon Territory and the Territory of Nunavut (collectively, the
"Jurisdictions") has received an application (the "Application") from
Loewen Group International, Inc. (the "Applicant") for a decision pursuant to
the securities legislation of the Jurisdictions (the "Legislation") that the
requirements contained in the Legislation to be registered to trade in a security, to file
a preliminary prospectus and a prospectus and to receive receipts therefor (the
"Registration and Prospectus Requirements") shall not apply to trades of certain
securities pursuant to a plan of reorganization (the "Plan") made under the U.S.
Bankruptcy Code (the "Bankruptcy Code");
AND WHEREAS pursuant to the Mutual Reliance Review
System for Exemptive Relief Applications (the "System"), the Ontario
Securities
Commission is the principal regulator for this Application;
AND WHEREAS the Applicant has represented to the
Decision Makers that:
1. The Loewen Group Inc. ("Loewen") is a
corporation incorporated under the laws of the Province of British Columbia.
Loewen and its subsidiaries are in the business
of operating funeral homes and cemeteries throughout North America and the United
Kingdom.
2. Loewen's principal and executive offices are located in Toronto, Ontario.
3. Loewen is a reporting issuer in each of the Jurisdictions where such concept exists
and, to the best of the Applicant's knowledge, is not in default of any of the
requirements of the Legislation.
4. The common shares of Loewen (the "Loewen Shares") were delisted from The New
York Stock Exchange on April 13, 2000. The Loewen Shares (and the preferred shares of
Loewen (the "Loewen Preferred Shares")) were delisted from the Toronto Stock
Exchange (the "TSE") on November 21, 2001.
5. The Applicant was incorporated under the laws of the State of Delaware and is an
indirect wholly-owned subsidiary of Loewen.
6. The Applicant's executive officers will be located in Toronto, Ontario as
at the
effective date (the "Effective Date") of the reorganization contemplated
under
the Plan.
7. The Applicant is not a reporting issuer in any of the Jurisdictions.
8. On June 1, 1999, Loewen and approximately 860 of its U.S. subsidiaries, including
the
Applicant (collectively, the "U.S. Debtors"), filed voluntary petitions
for
relief pursuant to Chapter 11 of the Bankruptcy Code.
9. After lengthy negotiations between Loewen and various stakeholders and their
representatives whose claims will be impaired under the Plan, the Plan was created
as a means to satisfy the rights of holders of claims against and certain limited
equity
interests in the U.S. Debtors (such holders, the "Creditors").
10. On June 1, 1999, Loewen and approximately 117 of its Canadian subsidiaries
(the "CCAA Debtors") obtained a protective order of the Ontario Court of Justice (the
"Ontario Court") pursuant to the Companies' Creditors Arrangement Act (the "CCAA").
11. Loewen and the CCAA Debtors are not required to file a separate plan of reorganization
under the CCAA.
12. The Plan (and the CCAA proceedings) provide for a reorganization of the corporate
structure of Loewen and its subsidiaries, including the Applicant (collectively,
the "Debtors"), and a recapitalization of the Applicant, as a result
of which the Applicant will become the successor to the business of Loewen and
its subsidiaries and
replace Loewen as the parent company in the corporate structure.
13. The implementation of the Plan is necessary for the business of the Loewen group of
companies to continue as a going concern.
14. The reorganization pursuant to the Plan constitutes a related party transaction for
the purposes of Ontario Securities Commission Rule 61-501 Insider Bids, Issuer Bids,
Going Private Transactions and Related Party Transactions and Qu�bec Securities
Commission Local Policy Statement Q-27 Requirements for Minority Security Holders
Protection in Certain Transactions but is exempt from the valuation and minority
approval requirements of such rule and policy statement.
15. The Plan provides, among other things:
(a) transactions that will result in the ultimate parent company in the corporate structure being the Applicant;
(b) some combination of cash, secured and unsecured debt instruments, warrants, common stock and interests in a trust being given in satisfaction of certain indebtedness;
(c) the assumption and assignment or rejection of executory contracts and unexpired leases to which any Debtor is a party;
(d) the selection of the board of directors of the Applicant and the reorganized Loewen subsidiary debtors;
(e) the corporate restructuring of the Loewen subsidiary debtors to simplify the Debtors' corporate structure and a similar restructuring of certain of the Canadian subsidiaries of Loewen; and
(f) certain other transactions resulting in the transfer of substantially all of Loewen's assets to the Applicant or a wholly owned subsidiary of the Applicant.
16. As at the Effective Date of the reorganization
contemplated under the Plan, the authorized capital of the Applicant will
consist of 100,000,000 shares of common stock
("New Common Stock") and 10,000,000 shares of preferred stock.
17. It is intended that the New Common Stock will be traded on the Nasdaq National
Market
system ("NASDAQ") or a United States national securities exchange on
the
Effective Date.
18. The Applicant will not be, and does not intend to become, a reporting issuer in any of
the Jurisdictions following the Effective Date, other than in the Province of Saskatchewan
where it will be deemed to be a reporting issuer pursuant to the Legislation of such
Jurisdiction as a result of the reorganization contemplated under the Plan but in respect
of which exemptive relief has been requested from the Decision Maker in Saskatchewan.
19. Pursuant to the Bankruptcy Code, the Plan is subject to the approval (the "Creditor Approval")
of the Creditors.
20. In connection with the Creditor Approval, a disclosure statement for the
Plan (the "Disclosure Statement") was prepared in accordance with the
requirements of the
Bankruptcy Code and approved by the U.S. Court.
21. The Disclosure Statement provides a detailed description of the terms of the Plan, the
background and events leading to the filing of the Plan and prospectus-level disclosure of
the business of the Applicant, including pro forma financial statements.
22. The Disclosure Statement also indicates that the issuance and transfer of the
Reorganization Securities (as defined in paragraph 28 below) may be made subject to relief
granted by the applicable Decision Makers and that such relief may be subject to
restrictions or conditions, including restrictions on the transferability of such
securities.
23. The Disclosure Statement was distributed to the Creditors and shareholders of Loewen
on or about September 14, 2001.
24. In addition to the Creditor Approval, the Plan was also confirmed by the U.S. Court at
a confirmation hearing completed on December 4, 2001. Recognition of the confirmation by
the Ontario Court was received at a hearing on December 7, 2001.
25. All distributions of securities to Creditors will be made pursuant to the Plan.
26. Substantially all Creditors are at arms length to the Applicant.
27. Holders of Loewen Shares and Loewen Preferred Shares will not receive any
distributions under either of the Plans.
28. On the Effective Date, the Applicant will issue the following securities
to Creditors (depending upon their claims) under the Plan (such issuances, collectively,
the "Reorganization Trades"):
(a) approximately 40,000,000 shares of New Common Stock;
(b) warrants (the "Warrants") to acquire up to approximately 3,000,000 shares of New Common Stock;
(c) an aggregate principal amount of US$250 million of five-year secured notes (the "Five-Year Secured Notes"), unless the Applicant and its subsidiaries obtain a US$250 million term loan to be funded on the Effective Date;
(d) up to an aggregate principal amount of US$165 million (less the proceeds from the distribution of certain assets) two-year unsecured notes (the "Two-Year Unsecured Notes");
(e) up to an aggregate principal amount of between US$325 million and US$330 million seven-year unsecured notes (the "Seven-Year Unsecured Notes"); and
(f) an aggregate principal amount of US$24,679,000 subordinated convertible notes (the "Unsecured Subordinated Convertible Notes" and, together with the New Common Stock, the Warrants, the Five-Year Secured Notes, the Two-Year Unsecured Notes and the Seven-Year Unsecured Notes, the "Reorganization Securities") convertible initially into an aggregate of 1,437,332 shares of New Common Stock.
29. Also on the Effective Date and pursuant to the
Plan, a trust (the "Liquidating
Trust") will be established pursuant to the laws of the State of New York for the
benefit of certain Creditors (the "Beneficiaries"), whereby the Applicant will
transfer or cause to be transferred to the Liquidating Trust (i) warrants (the "Prime
Warrants") previously issued by Prime Succession Holdings Inc. ("Prime")
to Loewen and the Applicant which are exercisable for 500,000 shares of common
stock of
Prime, and (ii) an interest in proceeds, if any, in respect of a claim under
NAFTA.
30. Prime is a Delaware corporation, the issued and outstanding capital of which consists
of 5,000,000 shares of common stock. Prime is not a reporting issuer in any of the
Jurisdictions. The common stock of Prime does not trade on any market or exchange.
31. A trustee (the "Liquidating Trustee") will hold legal title to the assets of
the Liquidating Trust and will cause to be issued (such issuance, also a
"Reorganization Trade") by the Liquidating Trust to the Beneficiaries
certificates (the "Liquidating Trust Certificates" and such certificates, also
"Reorganization Securities") evidencing their beneficial interests
in the assets
of the Liquidating Trust.
32. The Prime Warrants (also "Reorganization Securities") may be (i) distributed
to the Beneficiaries (such trade, also a "Reorganization Trade"), (ii)
sold, with the proceeds distributed to the Beneficiaries, or (iii) exercised
by the Liquidating
Trustee who will then sell the common stock acquired pursuant thereto and distribute
the
proceeds to the Beneficiaries.
33. The Applicant believes that, pursuant to the provisions of the Bankruptcy Code, the
offer and distribution of the Reorganization Securities and the Liquidating Trust
Certificates under the Plan are exempt from registration under U.S. federal and state
securities laws. Furthermore, the resale of such securities will also generally be exempt
from registration under such laws.
34. Pursuant to the terms of the agreement which will establish the Liquidating Trust, the
Liquidating Trustee and the Beneficiaries, among others, will be prohibited from taking
any steps to facilitate the development of a secondary market in the Liquidating Trust
Certificates. Furthermore, the Liquidating Trustee will only permit the transfer of
Liquidating Trust Certificates in certain limited circumstances (e.g. upon death and
between family members), as described in the Disclosure Statement.
35. Residents of Canada do not represent more than 10% of the total number of Creditors.
36. Immediately following the implementation of the Plan, residents of Canada will not
hold, directly or indirectly, more than 10% of any class of the Reorganization Securities.
37. As at the Effective Date, residents of Canada would not hold, directly or indirectly,
more than 10% of the New Common Stock if all of the Warrants and Unsecured Subordinated
Convertible Notes were exercised or converted on the Effective Date. As at the Effective
Date, residents of Canada also would not hold, directly or indirectly, more than 10% of
Prime common stock if all of the Prime Warrants were exercised on the Effective Date.
38. The Applicant will be subject to the reporting requirements of section 13 of the
Securities Exchange Act of 1934 pursuant to the registration of equity securities under
section 12(g) of such Act.
39. Disclosure documents sent to holders of Reorganization Securities resident in the U.S.
will also be provided to holders of Reorganization Securities resident in the
Jurisdictions.
AND WHEREAS under the System, this
MRRS Decision Document evidences the decision of each Decision Maker (collectively,
the "Decision");
AND WHEREAS each of the Decision Makers is satisfied
that the test contained in the Legislation that provides the Decision Maker with the
jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the
Legislation is that the Registration and Prospectus Requirements shall not apply to the
Reorganization Trades, provided that:
A. all approvals required by orders of the U.S. Court and the Ontario Court to implement
the Plan have been obtained, and all conditions of such Plan have been satisfied or waived
in accordance with such Plan; and
B. the first trade in a Jurisdiction of the Reorganization Securities shall be deemed to
be a distribution or primary distribution to the public under the Legislation of such
Jurisdiction unless such trade is made through an exchange or a market outside of Canada
or to a person or company outside of Canada.
Dated this 21st day of December, 2001.
| Paul Moore | Lorne Morphy |
Headnote
Subsection 74(1) - Exemption from the registration and prospectus requirements with
respect to distributions of various securities of a new issuer to creditors of old issuer
in connection with a reorganization made under U.S. Bankruptcy Code and plan of
arrangement under the Companies' Creditors Arrangement Act - first trades deemed to be a
distribution unless made through an exchange or market outside of Canada.
Statutes Cited
Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36
Rules Cited
Ontario Securities Commission Rule 45-501 - Exempt Distributions
Ontario Securities Commission Rule 61-501 - Insider Bids, Issuer Bids, Going
Private Transactions and Related Party Transactions