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Procter & Gamble Company - MRRS Decision
Headnote
MRRS - Relief from registration and prospectusrequirements for trades involving employees, former employeesand designated beneficiaries pursuant to equity investment planB Relief from issuer bid requirements for acquisition by issuerof securities in connection with exercise mechanisms under equityinvestment plan B Issuer with de minimis Canadian presence.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am. ss.25, 53, 35(1)(12)(iii), 72(1)(f)(iii), 74(1) and 144.
Policies Cited
Rule 45-503 - Trades to Employees, Executivesand Consultants.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, BRITISH COLUMBIA AND ALBERTA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
THE PROCTER & GAMBLE COMPANY
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia and Alberta (the "Jurisdictions")has received an application from The Procter & Gamble Company("P&G" or the "Company") for a decisionpursuant to the securities legislation of the Jurisdictions(the "Legislation") that (i) the requirement containedin the Legislation to be registered to trade in a security (the"Registration Requirements") will not apply to certaintrades in securities of P&G made in connection with TheProcter & Gamble 2001 Stock and Incentive Compensation Plan(the "Plan"); (ii) the Registration Requirements willnot apply to first trades of shares ("Shares") acquiredunder the Plan executed on an exchange or market outside ofCanada; and (iii) the requirements contained in the Legislationrelating to the delivery of an offer and issuer bid circularand any notices of change or variation thereto, minimum depositperiods and withdrawal rights, take-up and payment for securitiestendered to an issuer bid, disclosure, restrictions upon purchasesof securities, financing, identical consideration, collateralbenefits, together with the requirement to file a reportingform within ten (10) days of an exempt issuer bid and pay arelated fee (the "Issuer Bid Requirements") will notapply to certain acquisitions by the Company of Shares pursuantto the Plan in each of the Jurisdictions;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS P&G has representedto the Decision Makers as follows:
1. P&G is presently a corporation incorporatedunder the laws of the State of Ohio.
2. P&G is registered with the Securitiesand Exchange Commission (the "SEC") in the UnitedStates under the United States Securities Exchange Act of 1934(the "Exchange Act") and is not exempt from the reportingrequirements of the Exchange Act pursuant to Rule 12g3-2 madethereunder.
3. The authorized share capital of P&G consistsof 5,000,000,000 shares of common stock ("Shares"),600,000,000 shares of Class A Preferred Stock and 200,000,000shares of Class B Preferred Stock, of which as of February 28,2002, there were 1,298,790,995 Shares, 51,883,755 shares ofSeries A Class A Preferred Stock, 36,184,836 shares of SeriesB Class A Preferred Stock and no Class B Preferred Stock issuedand outstanding.
4. The Shares are listed on the New York StockExchange (the "NYSE") and on exchanges in Cincinnati,Amsterdam, Paris, Basle, Geneva, Lausanne, Frankfurt, Antwerp,Brussels and Tokyo (collectively, the "Exchanges").
5. P&G is not a reporting issuer in anyof the Jurisdictions and P&G does not have a present intentionof becoming a reporting issuer in any of the Jurisdictions.
6. P&G uses the services of an agent forthe Plan (an "Agent"). Initially, Merrill Lynch &Co., Inc. ("Merrill Lynch") has been appointed asan Agent for the Plan. Merrill Lynch is, and any Agent appointedin addition to or in replacement of Merrill Lynch is expectedto be, a corporation registered under applicable U.S. securitiesor banking legislation and has been, or will be, authorizedby P&G to provide services as an Agent under the Plan. MerrillLynch is not and any replacement or additional Agent is notexpected to be a registrant in any of the Jurisdictions.
7. The role of the Agent may include: (a) assistingwith the general administration of the Plan and providing variousrecord keeping services; (b) holding Shares on behalf of Participants,former Participant who have undergone Retirement or a SpecialSeparation as defined by the Plan ("Former Employees")and, in the case of the death of a Participant, the approvedrecipient of an Option Award under a will or pursuant to thelaws of intestacy (a "Beneficiary"), in the Plan;(c) facilitating exercises of options over Shares ("Options")(including cashless exercises) under the Plan; (d) maintainingrecord keeping and brokerage accounts on behalf of Participants,Former Employees and Beneficiaries under the Plan; (e) holdingShares acquired under the Plan on behalf of Participants, FormerEmployees and Beneficiaries in limited purpose brokerage accounts;(f) facilitating the payment of withholding taxes; and (g) facilitatingthe resale of Shares acquired under the Plan through the Exchangesor such other stock exchange or market upon which the Sharesmay be listed.
8. The Shares to be issued under the Plan willbe previously authorized but unissued Shares or treasury Shares.
9. The purposes of the Plan are to strengthenthe alignment of interests between those Participants who arelargely responsible for the success of the business and P&G'sshareholders through ownership behaviour and increased ownershipof Shares, and to encourage the Participants to remain in theemploy of the P&G Companies.
10. As of February 28, 2002, the distributionof Participants in the Jurisdictions was as follows: 156 Participantsin Ontario, 4 Participants in Alberta and 3 Participants inBritish Columbia.
11. Under the Plan, Options, stock appreciationrights ("SARs"), performance related awards ("PerformanceAwards") and restricted or unrestricted Shares (collectively,"Awards") may be issued to those Participants selectedby the Compensation Committee (the "Committee") ofP&G's board of directors (the "Board"), or suchother committee as is designated by the Board.
12. Options and SARs granted to Participantsunder the Plan are not transferable other than by will or thelaws of intestacy and shall be exercisable, during a recipientParticipant's lifetime, only by the Participant or, in the eventof legal incompetence of the Participant, his or her legal guardian.
13. Generally, except in the case of death,Retirement or certain Special Separations, when a Participantholding an Award ceases to be an employee of the P&G Companies,outstanding Options or SARs will be void regardless of whethersuch Options or SARs were exercisable or unexercisable on thedate upon which the Participant ceased to be an employee. Inthe case of Retirement or a Special Separation, Former Employeesmay continue to have rights in respect of the Plan ("Post-TerminationRights"). In addition, in the event of a Participant'sdeath, a Beneficiary may have Post-Termination Rights. Post-TerminationRights may include, among other things, the right to exercisean Option or SAR and to receive Shares underlying an Award fora period determined in accordance with the Plan following terminationand the right to sell Shares acquired under the Plan throughthe Agent.
14. The Committee shall establish proceduresgoverning the exercise of Options and SARs. Generally, in orderto exercise an Option or SAR, the Participant, Former Employeeor Beneficiary must submit to P&G a written notice of exercisein the form prescribed by the Committee from time to time ("Noticeof Exercise").
15. Upon exercise of a SAR, the Participant,Former Employee or Beneficiary will be entitled to receive aredemption differential for each SAR being exercised which willbe calculated as the difference between the then fair marketvalue of a Share and the exercise price of the SAR. The Committee,in its sole discretion, may determine to pay a SAR in Shares,cash or a combination of Shares and cash.
16. Upon the exercise or granting of any Award,P&G shall have the right to deduct an appropriate amountof cash in order to satisfy any applicable withholding tax obligationsor to take such other action as may be necessary in the opinionof P&G or the Committee to satisfy all obligations for thewithholding of such taxes.
17. The Committee may authorize any Participantto convert cash compensation otherwise payable to such Participantinto Options or Shares under the Plan upon such terms and conditionsas the Committee, in its discretion, shall determine. Notwithstandingthe foregoing, in any such conversion the Shares shall be valuedat no less than one hundred percent (100%) of their fair marketvalue.
18. Canadian resident shareholders of P&Gdo not own, directly or indirectly, more than 10% of the issuedand outstanding Shares and do not represent in number more than10% of the total number of shareholders of P&G. If at anytime, during the duration of the Plan, Canadian shareholdersown, in the aggregate, greater than 10% of the total numberof issued and outstanding Shares or if such shareholders representin number more than 10% of all shareholders of P&G, P&Gwill not grant further Awards without first applying to theregulators in the relevant Jurisdictions for a decision withrespect to such further grants under the Plan.
19. A prospectus prepared in accordance withU.S. securities laws describing the terms and conditions ofthe Plan will be delivered to each Participant who is grantedan Award under the Plan. The annual report, proxy materialsand other materials, which P&G is required to file withthe SEC will be provided or made available to Canadian residentParticipants at the same time and in the same manner as thedocuments are provided or made available to U.S. resident Participants.
20. Participants, Former Employees or Beneficiariesmay exercise Options and sell Shares acquired under the Planthrough the Agent.
21. As there is no market for the Shares inCanada and none is expected to develop, it is expected thatthe resale by Participants, Former Employees or Beneficiariesof Shares acquired under the Plan will be effected through theNYSE or one of the other Exchanges.
22. The Legislation of certain of the Jurisdictionsdoes not contain exemptions from the Registration Requirementsfor Award exercises by Employees, Former Employees or Beneficiariesthrough the Agent where the Agent is not a registrant.
23. Where the Agent sells Shares on behalf ofEmployees, Former Employees or Beneficiaries, none of the Employees,Former Employees, Beneficiaries or the Agent is able to relyon the exemption from the Registration Requirements containedin the Legislation of certain Jurisdictions to effect such sales.
24. The exemptions in the Legislation from theIssuer Bid Requirements are not available for certain acquisitionsby the Company of its Shares from Employees, Former Employeesor Beneficiaries in accordance with the terms of the Plan, sinceacquisitions relating to Share Reacquisitions may occur at aprice that is not calculated in accordance with the "marketprice," as that term is defined in the Legislation; underthe Plan, the Company will acquire such Shares at their fairmarket value, as determined in accordance with the Plan.
AND WHEREAS pursuant to the System,this Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makerspursuant to the Legislation is that:
(a) the Registration Requirements shall notapply to any trade or distribution of Shares or Awards madein connection with the Plan, including trades or distributionsinvolving P&G or its affiliates, the Agent, Employees, FormerEmployees or Beneficiaries, provided that the first trade inShares acquired under the Plan pursuant to this Decision shallbe deemed a distribution unless the conditions in subsection2.14(1) of Multilateral Instrument 45-102 "Resale of Securities"are satisfied;
(b) the first trade by Employees, Former Employeesor Beneficiaries in Shares acquired pursuant to this Decision,including first trades effected through the Agent, shall notbe subject to the Registration Requirements, provided such firsttrade is executed through a stock exchange or market outsideof Canada; and
(c) the Issuer Bid Requirements shall not applyto the acquisition by P&G of Shares from Employees, FormerEmployees and Beneficiaries in connection with the Plan providedsuch acquisitions are made in accordance with the provisionsof the Plan.
May 7, 2002.
"Robert W. Korthals" "H. Lorne Morphy"