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Hewitt Associates, Inc. - MRRS Decision
Headnote
MRRS - Registration and prospectus relief forissuance of securities by foreign issuer to Canadian employeesand related trades under stock ownership plans - Issuer bidrelief for foreign issuer in connection with acquisition ofshares under stock ownership plans - Issuer with de minimisCanadian presence.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 74(1), 104(2)(c).
Applicable Ontario Rules
Rule 45-503 - Trades to Employees, Executivesand Consultants.
Applicable Instrument
Multilateral Instrument 45-102 - Resale of Securities- s. 2.14.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, BRITISH COLUMBIA,ALBERTA AND
SASKATCHEWAN
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
HEWITT ASSOCIATES, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia, Alberta and Saskatchewan (the"Jurisdictions") has received an application fromHewitt Associates, Inc. ("Hewitt" or the "Company")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that (i) the requirementcontained in the Legislation to be registered to trade in asecurity (the "Registration Requirements") will notapply to certain trades in securities of Hewitt made in connectionwith The Global Stock and Incentive Compensation Plan (the "Plan")of Hewitt; (ii) the Registration Requirements will not applyto first trades of Shares (as defined below) acquired underthe Plan and the Directed Share Program (the "Program")of Hewitt executed on an exchange or market outside of Canada;and (iii) the requirements contained in the Legislation relatingto the delivery of an offer and issuer bid circular and anynotices of change or variation thereto, minimum deposit periodsand withdrawal rights, take-up and payment for securities tenderedto an issuer bid, disclosure, restrictions upon purchases ofsecurities, financing, identical consideration, collateral benefits,together with the requirement to file a reporting form withinten days of an exempt issuer bid and pay a related fee (the"Issuer Bid Requirements") will not apply to certainacquisitions by the Company of Shares pursuant to the Plan ineach 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 Hewitt has represented tothe Decision Makers as follows:
1. Hewitt is presently a corporation in goodstanding incorporated under the laws of the State of Delaware;the head office of Hewitt is located in Lincolnshire, Illinois.
2. Hewitt and affiliates of Hewitt (the "HewittAffiliates") (Hewitt and the Hewitt Affiliates are,collectively, the "Hewitt Companies") provideglobal outsourcing and consulting services and deliver a completerange of human capital management services to other companies.
3. Pursuant to a registration statement filedwith the United States Securities and Exchange Commission(the "SEC") on March 12, 2002 as amendedon May 17, 2002, June 4, 2002, June 10, 2002, and June 27,2002 11,150,000 Class A shares of Hewitt common stock ("Shares")have been registered and issued in connection with the Company'sinitial public offering (the "IPO") whichwas completed on June 27, 2002. This number excludes Sharesissuable upon exercise of the Options granted to Employees(as defined below) immediately following the IPO, and 1,672,500Shares, representing the underwriters' over-allotment option.The over-allotment was exercised by the underwriters on July12, 2002. Hewitt granted Awards (as defined below) under thePlan and offered Shares under the Program simultaneously withthe IPO.
4. Hewitt is registered with the SEC in theU.S. under the U.S. Securities Exchange Act of 1934 (the "ExchangeAct") and is not exempt from the reporting requirementsof the Exchange Act pursuant to Rule 12g 3-2.
5. The authorized share capital of Hewittconsists of: 750,000,000 Shares, 200,000,000 shares of classB common stock, 50,000,000 shares of class C common stock,1,400,000 shares of series A preferred stock, and 8,600,000shares of undesignated preferred stock. As of July 2002, thereare 18,612,408 Shares (excluding Shares representing Optionsissued immediately after the IPO), 70,819,520 shares of classB common stock, 0 shares of class C common stock, 1,400,000shares of series A preferred stock and 0 shares of undesignatedpreferred stock issued and outstanding.
6. On June 5, 2002, Hewitt acquired the benefitsconsulting business of Bacon & Woodrow, a leading retirementand financial management consulting firm in the United Kingdom.In connection with the acquisition, the former partners andemployees of Bacon & Woodrow received an aggregate of1.4 million shares of Hewitt series A preferred stock, whichmay be exchanged for common stock of Hewitt valued at £140million (US$210 million). Hewitt also assumed approximately£16.5 million (US$25 million) of liabilities in excessof assets of the benefits consulting business of Bacon &Woodrow. Upon exchange of the Hewitt series A preferred stock,the former partners of Bacon & Woodrow will receive sharesof Hewitt class B common stock and Hewitt class C common stock,while the non-partner employees of Bacon & Woodrow willreceive the Shares. Hewitt has reserved 1,105,263 Shares forissuance to the non-partner employees of Bacon & Woodrowand 3,409,561 shares of Hewitt class B common stock and 6,537,808shares of Hewitt class C common stock for issuance to theformer partners of Bacon & Woodrow, in each case, in exchangefor their shares of Hewitt series A preferred stock. The actualnumber of shares issued may be higher or lower than the numberof shares reserved for issuance. With the completion of theIPO, the securities issued in connection with the acquisitionof the benefits consulting business of Bacon & Woodrowrepresent approximately 11.2% of Hewitt's total outstandingcommon stock on a fully exchanged basis. For purposes of thesecalculations, Hewitt has assumed an exchange price for theseries A preferred stock equal to the offering price of US$19.00.and the June 25, 2002 exchange rate of 1.50 U.S. Dollars perBritish Pound Sterling for all calculations with respect tothe acquisition of the benefits consulting business of Bacon& Woodrow and the exchange of Hewitt's series A preferredstock. The actual share price and exchange rate shall be theaverage share price and exchange rate during the five tradingday period following the 25th day after the consummationof the IPO. The common stock issued to the former partnersand employees of Bacon & Woodrow will be subject to restrictionson transfer.
7. The Shares are listed for trading on theNew York Stock Exchange (the "NYSE") underthe trading symbol "HEW."
8. Hewitt is not a reporting issuer in anyof the Jurisdictions and has no present intention of becominga reporting issuer in any of the Jurisdictions.
9. Under the Program, certain Participants(as defined below) were provided with the opportunity to purchaseShares at the IPO price, on the date of the IPO from SalomonSmith Barney, Inc. ("Salomon"), an initialAgent (as defined below) appointed under the Plan and theProgram. The Shares purchased under the Program were distributedto Salomon by Hewitt through a group of underwriters appointedunder the IPO: Goldman Sachs & Co., Banc of America SecuritiesLLC, J.P. Morgan Securities, Inc., Salomon, UBS Warburg LLC,Wachovia Securities, Inc. and First Union Securities, Inc.(collectively, the "Underwriters"). Noneof the Underwriters is registered to conduct retail tradesin securities in the Jurisdictions but each of the Underwritersis registered under applicable U.S. securities or bankinglegislation.
10. The purpose of the Plan is to promotethe long-term interests of the Company and its stockholdersby strengthening the Company's ability to attract, motivate,and retain Employees (as defined below) and Directors (asdefined below) of the Company upon whose judgment, initiative,and efforts the financial success and growth of the businessof the Company largely depend, and to provide an additionalincentive for such individuals through stock ownership andother rights that promote and recognize the financial successand growth of the Company and create value for stockholders.
11. Subject to adjustment as described inthe Plan and increases made in accordance with U.S. law, themaximum number of Shares that may be issued pursuant to thePlan is twenty-five million (25,000,000).
12. All necessary securities filings havebeen made in the U.S. in order to offer the Plan and the Programto Participants resident in the U.S.
13. The Plan permits grants of: options onShares ("Options"); stock appreciation rights("SARs"), restricted stock ("RestrictedStock"), restricted stock units ("RestrictedStock Units"), performance units ("PerformanceUnits"), performance shares ("PerformanceShares"), cash-based awards ("Cash-BasedAwards"), annual management incentive awards ("AnnualManagement Incentive Awards") and dividend equivalents("Dividend Equivalents") (Shares, Options,SARs, Restricted Stock, Restricted Stock Units, PerformanceShares, Performance Units, Cash-Based Awards, Annual ManagementIncentive Awards and Dividend Equivalents are collectively,"Awards") to employees ("Employees")and directors ("Directors") of the HewittCompanies ("Participants").
14. As of June 13, 2002 there were approximately417 persons in Canada eligible to receive Awards under orparticipate in the Plan and the Program: 70 persons residentin British Columbia, 13 persons resident in Alberta, 9 personsresident in Saskatchewan, 320 persons resident in Ontario;and 5 persons resident in Quebec. A separate application wasfiled with the Commission des valeurs mobilères duQuébec (the "CVMQ") in connection with thePlan and the Program as the timing and the nature of the reliefrequired in Quebec differs materially from that required inthe Jurisdictions. The decisions providing the requisite exemptiverelief in connection with trades involving Quebec residentsunder the Plan and the Program were granted by the CVMQ onJune 14, 2002.
15. Hewitt intends to use the services ofone or more agents/brokers in connection with the Plan andthe Program (each an "Agent"). Salomon hasbeen appointed as an initial Agent under the Plan and theProgram. Salomon is not registered to conduct retail tradesin securities in any of the Jurisdictions. Salomon is registeredunder applicable U.S. securities or banking legislation andany other Agent appointed to take on a broker type role inconnection with the Plan and the Program, in addition to orin replacement of Salomon, will be a registrant in the Jurisdictionsor a corporation registered under applicable U.S. securitiesor banking legislation and will be authorized by Hewitt toprovide services as an Agent under the Plan and the Program.
16. The role of the Agent may include: (a)disseminating information and materials to Participants inconnection with the Plan and the Program; (b) assisting withthe administration of and general record keeping for the Planand the Program; (c) holding Shares acquired under the Planor the Program on behalf of Participants, Former Participants(as defined below) and Permitted Transferees (as defined below)in limited purpose brokerage accounts; (d) facilitating Awardexercises (including cashless exercises and Stock Swap Exercises(as defined below)) under the Plan; (e) facilitating the paymentof withholding taxes, if any, by cash or the tendering orwithholding of Shares; (f) facilitating the reacquisitionof Awards under the terms of the Plan and the Program; and(g) facilitating the resale of Shares issued in connectionwith the Plan and the Program.
17. Employees of the Hewitt Companies whoparticipate in the Plan and the Program will not be inducedto purchase Shares or to exercise Awards by expectation ofemployment or continued employment.
18. Officers of the Hewitt Companies who participatein the Plan and the Program will not be induced to purchaseShares or to exercise Awards by expectation of appointmentor employment or continued appointment or employment as anofficer.
19. The Plan and the Program are administeredby the board of directors (the "Board") ofHewitt or a committee appointed by the Board (the "Committee").
20. Except as otherwise provided in a Participant'sAward Agreement (as such term is defined in the Plan), Awardsmay not be sold, transferred, pledged, assigned, or otherwisealienated or hypothecated, other than by will or by the lawsof intestacy. Shares issued under the Program will be subjectto a lock-up for a period of 90 days.
21. Following the termination of a Participant'srelationship with the Hewitt Companies for reasons of disability,retirement, termination, change of control or any other reason(such Participants being "Former Participants"),and on the death of a Participant where Awards have been transferredby will or pursuant to a beneficiary designation or the lawsof intestacy or otherwise as permitted under the Plan (suchbeneficiaries being "Permitted Transferees"),the Former Participants and Permitted Transferees will continueto have rights in respect of the Plan ("Post-TerminationRights").
22. Post-Termination Rights may include, amongother things: (a) the right to exercise Awards for a perioddetermined in accordance with the Plan and the Award; and(b) the right to sell Shares acquired under the Plan and theProgram through the Agent.
23. Post-Termination Rights are only availableif the Awards to which they relate were granted to the Participantwhile the Participant had a relationship with the Hewitt Companiesand no new Awards will be granted to Former Employees or PermittedTransferees.
24. Among other payment methods, the Planprovides that payment for Shares acquired pursuant to thePlan may be made: (a) in cash; (b) by the surrender of Sharesowned by the Participant to the Company for cancellation ("StockSwap Exercises") or to the Agent for resale withthe value of such surrendered Shares being determined at theFair Market Value (defined below) ; (c) in the case of Optionexercise, by the retention of a number of Shares by the Companyfrom the total number of Shares into which the Option is exercised;or (d) by a combination of the foregoing; generally, "FairMarket Value" means, with respect to a Share as ofa given date, the closing price of the Shares on the NYSEon the date in question or, if no sales of Shares were madeon said exchange on such date, on the next preceding day onwhich sales were made on such exchange.
25. The Board may specify in an Award Agreementthat the Participant's rights, payments, and benefits withrespect to an Award shall be subject to reduction, cancellation,forfeiture, or recoupment upon the occurrence of certain specifiedevents, in addition to any otherwise applicable vesting orperformance conditions of an Award. Such events shall include,but shall not be limited to, termination of employment forcause, breach of non-competition, confidentiality, or otherrestrictive covenants that may apply to the Participant, orother conduct by the Participant that is detrimental to thebusiness or reputation of the Hewitt Companies, or a mergerinvolving the Hewitt Companies or a sale of assets of theHewitt Companies, or the dissolution or liquidation of theHewitt Companies (collectively such forfeitures and cancellationbeing "Award Cancellations").
26. Hewitt shall have the right to deductapplicable taxes from any payment under the Plan by withholding,at the time of delivery or vesting of cash or Shares underthe Plan, an appropriate amount of cash or Shares ("ShareWithholding Exercises"; collectively, Share WithholdingExercises, Stock Swap Exercises and Award Cancellations are"Award Acquisitions") or a combination thereoffor a payment of taxes required by law or to take such otheraction as may be necessary in the opinion of Hewitt or theCommittee to satisfy all obligations for the withholding ofsuch taxes.
27. A prospectus prepared according to U.S.securities laws describing the terms and conditions of thePlan and the Program will be delivered to each Participantwho is granted an Award under the Plan or who purchases Sharesunder the Program. The annual reports, proxy materials andother materials Hewitt is required to file with the SEC willbe provided to Canadian Participants at the same time andin the same manner as the documents are provided or made availableto U.S. Participants.
28. Canadian shareholders do not own, directlyor indirectly, more than 10% of the issued and outstandingShares and do not represent in number more than 10% of theshareholders of Hewitt. If at any time during the currencyof the Plan or the Program Canadian shareholders of Hewitthold, in aggregate, greater than 10% of the total number ofissued and outstanding Shares or if such shareholders constitutemore than 10% of all shareholders of Hewitt, Hewitt will applyto the relevant Jurisdiction for an order with respect tofurther trades to and by Participants, Former Participantsand Permitted Transferees in that Jurisdiction in respectof Shares acquired under the Plan.
29. Participants, Former Participants or PermittedTransferees may exercise Awards and sell Shares acquired underthe Plan through an Agent.
30. Because there is no market for the Sharesin Canada and none is expected to develop, any resale of theShares acquired under the Plan will be effected through thefacilities of, and in accordance with the rules and laws applicableto, a stock exchange or organized market outside of Canadaon which the Shares may be listed or quoted for trading.
31. The Legislation of certain of the Jurisdictionsdoes not contain exemptions from the Registration Requirementsfor Award exercises by Participants, Former Participants orPermitted Transferees through the Agent where the Agent isnot a registrant.
32. Where the Agent sells Shares on behalfof Participants, Former Participants or Permitted Transferees,the Participants, Former Participants, Permitted Transfereesor the Agent may not be able to rely on the exemptions fromthe Registration Requirements contained in the Legislation.
33. The acquisition by Hewitt of Shares pursuantto the Award Acquisitions may be an issuer bid as definedin the Legislation. The exemptions in the Legislation fromthe Issuer Bid Requirements may not be available for theseacquisitions by the Company of its Shares from Participants,Former Participants or Permitted Transferees in accordancewith the terms of the Plan, since these acquisitions may occurat a price that is not calculated in accordance with the "marketprice," as that term is defined in the Legislation andmay be made from persons other than Employees or former Employees.
AND WHEREAS pursuant to the System, thisDecision Document evidences the decision of each Decision Maker(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 Makers pursuantto the Legislation is that:
(a) the Registration Requirements shallnot apply to any trade or distribution of Shares made uponthe exercise of Awards granted under the Plan, includingtrades or distributions involving Hewitt or the Hewitt Companies,the Agent, Participants, Former Participants or PermittedTransferees, provided that the first trade in Shares acquiredunder the Plan and the Program pursuant to this Decisionshall be deemed to be a distribution to the public underthe Legislation unless the conditions in section 2.14(1)of Multilateral Instrument 45-102 Resale of Securitiesare satisfied;
(b) the first trade by Participants, FormerParticipants or Permitted Transferees in Shares acquiredunder the Plan or the Program, including first trades effectedthrough the Agent, shall not be subject to the RegistrationRequirements, provided such first trade is executed througha stock exchange or market outside of Canada; and
(c) the Issuer Bid Requirements shall notapply to the acquisition by Hewitt of Shares from Participants,Former Participants or Permitted Transferees in connectionwith the Plan provided such acquisitions are made in accordancewith the provisions of the Plan.
August 23, 2002.
"Howard I. Wetston" "PaulM. Moore"