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Nestlé S.A. - MRRS Decision
Headnote
MRRS - Relief from registration and prospectusrequirements granted for certain trades in options and underlyingshares made by wholly owned subsidiary of Nestle S.A. in connectionwith implementation and operation of the Nestle S.A. stock optionplan. First trade in underlying shares deemed to be a distributionunless, except in Quebec, conditions in subsection 2.14(1) ofMultilateral Instrument 45-102 are satisfied and, in Quebec,provided that certain conditions are satisfied.
Applicable Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,sections 25, 53 and 74(1).
Ontario Securities Commission Rule 45-503 Tradesto Employees, Executives and Consultants.
Multilateral Instrument 45-102 Resale of Securities,subsection 2.14(1).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, ALBERTA, NOVA SCOTIAAND QUÉBEC
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
NESTLÉ S.A.
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof the Provinces of Ontario, Alberta, Nova Scotia and Québec(the "Jurisdictions") has received an applicationfrom Nestlé S.A. (the "Applicant") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to preparea prospectus (the "Prospectus Requirement") and tobe registered to trade in a security (the "RegistrationRequirement", together with the Prospectus Requirement,the "Registration and Prospectus Requirements"), shallnot apply in the Jurisdictions to certain trades by a Subsidiary(as defined below) of Shares and Options (each, as defined below)pursuant to the terms of the Nestlé Management StockOption Plan Regulations and amendments thereto (the "Plan");
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission (the "Commission")is the principal regulator for this application;
AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice14-101;
AND WHEREAS the Applicant has representedto the Decision Makers that:
1. The Applicant is a company existing underthe laws of Switzerland.
2. As at October 1, 2002, the share capitalof the Applicant consisted of 403,520,000 registered shares(the "Shares"), all of which were issued and outstanding.
3. The Shares are listed on the SWX SwissExchange and posted for trading on the virt-x Stock Exchangeas well as the London Stock Exchange, Bourse de Paris andDeutsche Börse in Europe. The Applicant is subject tothe reporting obligations of the Swiss Exchange, London StockExchange, Bourse de Paris and Deutsche Börse.
4. The Shares are not quoted or listed andposted for trading on any stock exchange or over-the-countermarket in Canada. There is therefore no market for the Sharesin Canada and the Applicant does not intend to list the Shareson any stock exchange or quotation system in Canada.
5. The Applicant is not, and has no presentintention of becoming, a reporting issuer in any Jurisdiction.
6. Under the Plan, the Applicant, or a whollyowned subsidiary of the Applicant (the "Subsidiary")that holds and owns Shares, grants options ("Options")to purchase Shares at the applicable exercise price to eligibleemployees of the Applicant and the Applicant's subsidiaries(collectively, the "Participants"). In order fora Subsidiary to grant an Option to a Participant, the Applicantrequests that the Subsidiary grant the Option to the Participantin accordance with the provisions of the Plan.
7. When a Participant is granted Options,the Applicant or the Subsidiary, as applicable, provides theParticipant with an agreement ("Option Agreement")setting out additional details in respect of the Options.The Option Agreement includes information regarding the numberof Options granted to the Participant and the price at whichthe Options may be exercised to purchase the Shares.
8. The Options may not be transferred duringthe Participant's lifetime and, upon the death of the Participant,are only transferable by will or pursuant to the laws of intestacy.
9. The Shares delivered to a Participant inrespect of the Options may be traded by the Applicant or theSubsidiary to the Participant, depending on whether the Applicantor the Subsidiary initially granted the Options to the Participant.Shares traded by a Subsidiary to a Participant are Sharespreviously acquired by the Subsidiary from the Applicant oron a stock exchange.
10. Upon the Participant's exercise of theOptions and purchase of Shares, the Participant is able tohold the Shares until such Participant decides to sell theShares immediately or at a later date on the virt-x StockExchange through the Administrator (as defined below).
11. The Applicant will use an administrator(which may include various affiliates and divisions of theadministrator) (the "Administrator") to carry outcertain administrative and transactional services in connectionwith the Plan, including a Participant's exercise of Optionsand sale of Shares. The Administrator presently selected bythe Applicant to carry out such services is Salomon SmithBarney Inc. Salomon Smith Barney Inc. is registered as an"Investment Dealer, Equities" under the SecuritiesAct (Ontario) but is not registered in any capacity underthe applicable legislation of any other Jurisdiction. SalomonSmith Barney Inc.'s Canadian affiliate, Salomon Smith BarneyCanada Inc., is registered as an "Investment Dealer,Equities" under the Securities Act (Ontario) andas a dealer (unrestricted practice) under the SecuritiesAct (Québec), but is not registered in any capacityunder the applicable legislation of the remaining Jurisdictions.
12. The Administrator's sale of the Shareson behalf of Participants will be carried out on the virt-xStock Exchange in accordance with the applicable rules andrequirements of such exchange.
13. Currently, the maximum number of Sharesthat may be issued under the Plan is 3,461,065, representing0.858% of the number of issued and outstanding Shares as ofOctober 1, 2002.
14. Participation in the Plan is voluntary.Participants have not been, and will not be, induced to participatein the Plan or to acquire Shares under the Plan by expectationof employment or continued employment.
15. As of October 1, 2002, the Applicant andthe Applicant's subsidiaries had approximately 47 Participantsresident in the Jurisdictions, representing less than 1% ofholders of Shares worldwide. The shareholdings of the 47 Participantsrepresent less than 1% of the total number of Shares issuedand outstanding.
16. As of October 1, 2002, the residents ofeach of the Jurisdictions, and of Canada, hold less than 10%of the issued and outstanding Shares as shown on the booksand records of the Applicant.
17. The Applicant will provide to the Participantsresident in each of the Jurisdictions, on the initial grantof the Options and on a continuous basis, with the same levelof disclosure in respect of the Plan as that provided to allother Participants worldwide. On becoming a holder of Sharesunder the Plan, such Participants will be provided with thesame level of disclosure in respect of the Applicant as theApplicant provides to all other holders of Shares.
AND WHEREAS under the System, this MRRSDecision 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 underthe Legislation is that:
(a) the Registration and Prospectus Requirementsshall not apply to the granting of Options by a Subsidiaryto a Participant provided that, except in Québec,the first trade in Shares underlying Options acquired underthe Plan by a Participant in a Jurisdiction shall be deemedto be a distribution under the Legislation, subject to theRegistration and Prospectus Requirements, unless the conditionsin subsection 2.14(1) of Multilateral Instrument 45-102Resale of Securities are satisfied and, in Québec,provided that such first trades are executed (a) throughan exchange or market outside of Canada or (b) among Participants,or between Participants and persons related to the Participants;and
(b) the Registration Requirement shall notapply to a trade of Shares by a Subsidiary, effected throughthe Administrator, to a Participant.
December 10, 2002.
"Howard I. Wetston" "TheresaMcLeod"