Securities Law & Instruments

Headnote

Subsection74(1) - Exemption from the registration and prospectus requirementswith respect to distributions of various securities of a new issuerto creditors of old issuer in connection with a reorganizationmade under U.S. Bankruptcy Code and plan of arrangement underthe Companies' Creditors Arrangement Act - first trades deemedto be a distribution unless made through an exchange or marketoutside of Canada.

StatutesCited

Companies'Creditors Arrangement Act, R.S.C. 1985, c. C-36

SecuritiesAct, R.S.O. 1990, c. S.5, ss. 25, 53, 74(1).


Rules Cited

Ontario SecuritiesCommission Rule 45-501 - Exempt Distributions

OntarioSecurities Commission Rule 61-501 - Insider Bids, Issuer Bids,Going Private Transactions and Related Party Transactions

INTHE MATTER OF

THESECURITIES LEGISLATION OF BRITISH COLUMBIA,

SASKATCHEWAN,MANITOBA, ONTARIO, QUEBEC,

NEWFOUNDLANDAND LABRADOR, NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWBRUNSWICK, THE NORTHWEST TERRITORIES, THE YUKON TERRITORY

ANDTHE TERRITORY OF NUNAVUT

AND

INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM

FOREXEMPTIVE RELIEF APPLICATIONS

AND

INTHE MATTER OF

LOEWENGROUP INTERNATIONAL, INC.

MRRSDECISION DOCUMENT

WHEREAS the local securities regulatory authorityor regulator (the "Decision Maker" and collectively, the "DecisionMakers") in each of the provinces of British Columbia, Saskatchewan,Manitoba, Ontario, Quebec, Newfoundland, Nova Scotia, PrinceEdward Island, New Brunswick, Northwest Territories, the YukonTerritory and the Territory of Nunavut (collectively, the "Jurisdictions")has received an application (the "Application") from LoewenGroup International, Inc. (the "Applicant") for a decision pursuantto the securities legislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to be registeredto trade in a security, to file a preliminary prospectus anda prospectus and to receive receipts therefor (the "Registrationand Prospectus Requirements") shall not apply to trades of certainsecurities 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 ReviewSystem for Exemptive Relief Applications (the "System"), theOntario Securities Commission is the principal regulator forthis Application;


AND WHEREAS the Applicant has represented to the DecisionMakers that:


1.The Loewen Group Inc. ("Loewen") is a corporation incorporatedunder the laws of the Province of British Columbia. Loewen andits subsidiaries are in the business of operating funeral homesand 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 wheresuch 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 delistedfrom The New York Stock Exchange on April 13, 2000. The LoewenShares (and the preferred shares of Loewen (the "Loewen PreferredShares")) were delisted from the Toronto Stock Exchange (the"TSE") on November 21, 2001.


5.The Applicant was incorporated under the laws of the State ofDelaware 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 thereorganization 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 11of the Bankruptcy Code.


9.After lengthy negotiations between Loewen and various stakeholdersand their representatives whose claims will be impaired underthe Plan, the Plan was created as a means to satisfy the rightsof holders of claims against and certain limited equity interestsin the U.S. Debtors (such holders, the "Creditors").


10.On June 1, 1999, Loewen and approximately 117 of its Canadiansubsidiaries (the "CCAA Debtors") obtained a protective orderof the Ontario Court of Justice (the "Ontario Court") pursuantto the Companies' Creditors Arrangement Act (the "CCAA").


11.Loewen and the CCAA Debtors are not required to file a separateplan of reorganization under the CCAA.


12.The Plan (and the CCAA proceedings) provide for a reorganizationof the corporate structure of Loewen and its subsidiaries, includingthe Applicant (collectively, the "Debtors"), and a recapitalizationof the Applicant, as a result of which the Applicant will becomethe successor to the business of Loewen and its subsidiariesand replace Loewen as the parent company in the corporate structure.


13.The implementation of the Plan is necessary for the businessof the Loewen group of companies to continue as a going concern.


14.The reorganization pursuant to the Plan constitutes a relatedparty transaction for the purposes of Ontario Securities CommissionRule 61-501 Insider Bids, Issuer Bids, Going Private Transactionsand Related Party Transactions and Quebec Securities CommissionLocal Policy Statement Q-27 Requirements for Minority SecurityHolders Protection in Certain Transactions but is exemptfrom the valuation and minority approval requirements of suchrule and policy statement.


15.The Plan provides, among other things:


(a) transactions that will result in the ultimate parent companyin 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 givenin satisfaction of certain indebtedness;


(c) the assumption and assignment or rejection of executorycontracts and unexpired leases to which any Debtor is a party;


(d) the selection of the board of directors of the Applicantand the reorganized Loewen subsidiary debtors;


(e) the corporate restructuring of the Loewen subsidiary debtorsto simplify the Debtors' corporate structure and a similar restructuringof certain of the Canadian subsidiaries of Loewen; and


(f) certain other transactions resulting in the transfer ofsubstantially all of Loewen's assets to the Applicant or a whollyowned subsidiary of the Applicant.


16.As at the Effective Date of the reorganization contemplatedunder the Plan, the authorized capital of the Applicant willconsist 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 theNasdaq National Market system ("NASDAQ") or a United Statesnational securities exchange on the Effective Date.


18.The Applicant will not be, and does not intend to become, areporting issuer in any of the Jurisdictions following the EffectiveDate, other than in the Province of Saskatchewan where it willbe deemed to be a reporting issuer pursuant to the Legislationof such Jurisdiction as a result of the reorganization contemplatedunder the Plan but in respect of which exemptive relief hasbeen requested from the Decision Maker in Saskatchewan.


19.Pursuant to the Bankruptcy Code, the Plan is subject to theapproval (the "Creditor Approval") of the Creditors.


20.In connection with the Creditor Approval, a disclosure statementfor the Plan (the "Disclosure Statement") was prepared in accordancewith the requirements of the Bankruptcy Code and approved bythe U.S. Court.


21.The Disclosure Statement provides a detailed description ofthe terms of the Plan, the background and events leading tothe filing of the Plan and prospectus-level disclosure of thebusiness of the Applicant, including pro forma financial statements.


22.The Disclosure Statement also indicates that the issuance andtransfer of the Reorganization Securities (as defined in paragraph28 below) may be made subject to relief granted by the applicableDecision Makers and that such relief may be subject to restrictionsor conditions, including restrictions on the transferabilityof such securities.


23.The Disclosure Statement was distributed to the Creditors andshareholders of Loewen on or about September 14, 2001.


24.In addition to the Creditor Approval, the Plan was also confirmedby the U.S. Court at a confirmation hearing completed on December4, 2001. Recognition of the confirmation by the Ontario Courtwas received at a hearing on December 7, 2001.


25.All distributions of securities to Creditors will be made pursuantto the Plan.


26.Substantially all Creditors are at arms length to the Applicant.


27.Holders of Loewen Shares and Loewen Preferred Shares will notreceive any distributions under either of the Plans.


28.On the Effective Date, the Applicant will issue the followingsecurities to Creditors (depending upon their claims) underthe Plan (such issuances, collectively, the "ReorganizationTrades"):


(a) approximately 40,000,000 shares of New Common Stock;


(b) warrants (the "Warrants") to acquire up to approximately3,000,000 shares of New Common Stock;


(c) an aggregate principal amount of US$250 million of five-yearsecured notes (the "Five-Year Secured Notes"), unless the Applicantand its subsidiaries obtain a US$250 million term loan to befunded on the Effective Date;


(d) up to an aggregate principal amount of US$165 million (lessthe proceeds from the distribution of certain assets) two-yearunsecured notes (the "Two-Year Unsecured Notes");


(e) up to an aggregate principal amount of between US$325 millionand US$330 million seven-year unsecured notes (the "Seven-YearUnsecured Notes"); and


(f) an aggregate principal amount of US$24,679,000 subordinatedconvertible notes (the "Unsecured Subordinated Convertible Notes"and, together with the New Common Stock, the Warrants, the Five-YearSecured Notes, the Two-Year Unsecured Notes and the Seven-YearUnsecured Notes, the "Reorganization Securities") convertibleinitially into an aggregate of 1,437,332 shares of New CommonStock.


29.Also on the Effective Date and pursuant to the Plan, a trust(the "Liquidating Trust") will be established pursuant to thelaws of the State of New York for the benefit of certain Creditors(the "Beneficiaries"), whereby the Applicant will transfer orcause to be transferred to the Liquidating Trust (i) warrants(the "Prime Warrants") previously issued by Prime SuccessionHoldings Inc. ("Prime") to Loewen and the Applicant which areexercisable for 500,000 shares of common stock of Prime, and(ii) an interest in proceeds, if any, in respect of a claimunder NAFTA.


30.Prime is a Delaware corporation, the issued and outstandingcapital 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 titleto the assets of the Liquidating Trust and will cause to beissued (such issuance, also a "Reorganization Trade") by theLiquidating Trust to the Beneficiaries certificates (the "LiquidatingTrust Certificates" and such certificates, also "ReorganizationSecurities") evidencing their beneficial interests in the assetsof the Liquidating Trust.


32.The Prime Warrants (also "Reorganization Securities") may be(i) distributed to the Beneficiaries (such trade, also a "ReorganizationTrade"), (ii) sold, with the proceeds distributed to the Beneficiaries,or (iii) exercised by the Liquidating Trustee who will thensell the common stock acquired pursuant thereto and distributethe proceeds to the Beneficiaries.


33.The Applicant believes that, pursuant to the provisions of theBankruptcy Code, the offer and distribution of the ReorganizationSecurities and the Liquidating Trust Certificates under thePlan are exempt from registration under U.S. federal and statesecurities laws. Furthermore, the resale of such securitieswill also generally be exempt from registration under such laws.


34.Pursuant to the terms of the agreement which will establishthe Liquidating Trust, the Liquidating Trustee and the Beneficiaries,among others, will be prohibited from taking any steps to facilitatethe development of a secondary market in the Liquidating TrustCertificates. Furthermore, the Liquidating Trustee will onlypermit the transfer of Liquidating Trust Certificates in certainlimited 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 totalnumber of Creditors.


36.Immediately following the implementation of the Plan, residentsof 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 Stockif all of the Warrants and Unsecured Subordinated ConvertibleNotes were exercised or converted on the Effective Date. Asat the Effective Date, residents of Canada also would not hold,directly or indirectly, more than 10% of Prime common stockif all of the Prime Warrants were exercised on the EffectiveDate.


38.The Applicant will be subject to the reporting requirementsof section 13 of the Securities Exchange Act of 1934 pursuantto the registration of equity securities under section 12(g)of such Act.


39.Disclosure documents sent to holders of Reorganization Securitiesresident in the U.S. will also be provided to holders of ReorganizationSecurities resident in the Jurisdictions.


AND WHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively,the "Decision");


AND WHEREAS each of the Decision Makers is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;


THE DECISION of the Decision Makers pursuant to theLegislation is that the

Registrationand Prospectus Requirements shall not apply to the ReorganizationTrades, provided that:


A.all approvals required by orders of the U.S. Court and the OntarioCourt to implement the Plan have been obtained, and all conditionsof such Plan have been satisfied or waived in accordance withsuch Plan; and


B.the first trade in a Jurisdiction of the Reorganization Securitiesshall be deemed to be a distribution or primary distributionto the public under the Legislation of such Jurisdiction unlesssuch trade is made through an exchange or a market outside ofCanada or to a person or company outside of Canada.

December 21, 2001.

"Paul Moore"      "Lorne Morphy"