Mutual Reliance Review System for ExemptiveRelief Applications -- Prospectus and registration relief grantedto a foreign issuer in relation to an offer to acquire all ofthe outstanding stock options of a Canadian affiliate made contemporaneouslywith a take-over bid of the affiliate by a wholly-owned subsidiaryof the foreign issuer. Exemption for issuances made "inconnection with a take-over bid" technically not available.Prospectus and registration relief granted for issuances ofoptions and shares on the exercise of options to former employeesand directors.
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 35(1)16, and 72(1)(j).
OSC Rule 45-503 - Trades to Employees, Executivesand Consultants.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,
MANITOBA, ONTARIO, QUÉBEC,NEW BRUNSWICK,
NOVA SCOTIA, AND NEWFOUNDLANDAND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
E. I. DU PONT DE NEMOURS ANDCOMPANY
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof the provinces of British Columbia, Alberta, Saskatchewan,Manitoba, Québec, Ontario, Nova Scotia, Newfoundlandand Labrador, and New Brunswick (collectively, the "Jurisdictions")has received an application from E. I. du Pont de Nemours andCompany (the "Filer" or "EID") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to be registeredto trade in a security (the "Registration Requirements")and to file and obtain a receipt for a preliminary prospectusand prospectus (the "Prospectus Requirements" andtogether with the Registration Requirements, the "Registrationand Prospectus Requirements") shall not apply to certaintrades by the Filer, Merrill Lynch, Pierce, Fenner & SmithIncorporated (the "Administrator") and DuPont CanadaInc. option holders who are resident in the Jurisdictions (the"Option Holders");
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Filer has representedto the Decision Makers that:
1. The Filer is a Delaware corporation. TheFiler operates globally, manufacturing a wide range of productsfor distribution and sale to many different markets, includingthe transportation, textile, construction, motor vehicle,agricultural, home furnishings, medical, packaging, electronicsand the nutrition and health markets.
2. The authorized share capital of EID consistsof 1,164,048,508 shares of common stock (the "EID Shares"),par value U.S. $0.30 per share. As at March 31, 2003, approximately1,083,007,081 EID Shares were issued and outstanding.
3. As at March 31, 2003, there were 281 registeredholders of EID Shares resident in Canada (representing 0.25%of the total number of registered stock holders) and holdingin aggregate 170,487 EID Shares (representing 0.02% of thetotal issued and outstanding EID Shares).
4. EID is not a reporting issuer, or the equivalent,under the securities legislation of any province or territoryof Canada and EID has no intention of becoming a reportingissuer, or the equivalent, in any such province or territory.
5. The EID Shares are listed on the New YorkStock Exchange (the "NYSE") under the symbol "DD".
6. There is presently no market in Canadafor any securities of the Filer, and no such market is expectedto develop.
7. EID is a reporting issuer in the UnitedStates and it is subject to the disclosure and other regulatoryrequirements of the applicable securities laws of the UnitedStates and the listing rules of the NYSE.
8. On April 17, 2003, DCI Acquisition Inc.(the "Offeror"), a subsidiary of the Filer madean offer (the "Offer") to purchase all of the outstandingclass A common shares, series 1 (the "Common Shares")of DuPont Canada Inc. ("DuPont Canada"), other thanCommon Shares already held by the Offeror and its affiliates.The Offer was made only for Common Shares and not made forany options to purchase Common Shares of DuPont Canada ("DuPontCanada Options"). As at April 17, 2003, the Offeror andits affiliates held 212,591,160 Common Shares of DuPont Canadarepresenting 76% of the total issued and outstanding CommonShares.
9. In a letter dated April 17, 2003 (the "OptionExchange Letter"), the Filer offered Option Holders theopportunity, subject to obtaining all necessary regulatoryapprovals, and to the acquisition by the Offeror of CommonShares under the Offer, to receive options to acquire EIDShares ("EID Options") in exchange for the surrenderof such holder's options under the DuPont Canada EmployeeStock Option Plan.
10. The exchange of options was designed topreserve, to the extent possible, the intrinsic value of theDuPont Canada Options. The number of EID Options an OptionHolder will receive in exchange for the surrender of its optionsand the exercise price of those options will differ from thenumber of, and exercise price of, the DuPont Canada Options.However the EID Options will otherwise be subject to the sameterms and conditions, including the dates of vesting, post-employmentexercisability provisions, assignment and transfer restrictionsand expiration as the DuPont Canada Options.
11. Option Holders who elect to surrendertheir options and receive EID Options will be provided withmaterials from the Administrator, as administrator for theEID Options, explaining how to exercise the EID Options.
12. Option Holders who receive EID Optionsand who exercise EID Options for EID Shares will, at thattime, become entitled to receive copies of all annual reportsand all other materials distributed to EID's shareholders.
13. Participation by Option Holders in theoffer set forth in the Option Exchange Letter is voluntary;none of the Option Holders has been induced to participatein the offer set forth in the Option Exchange Letter by theexpectation of employment or continued employment or furtheradvancement with DuPont Canada or any of its affiliates.
14. The issuance of EID Shares to residentsof the Jurisdictions on the exercise of their EID Optionswill be made in accordance with all applicable laws in theUnited States. The NYSE is the principal trading market forthe EID Shares. Because there is no active market in Canadaand none is expected to develop, it is expected that any resaleof the EID Shares by residents of the Jurisdictions will occurthrough the facilities of the NYSE.
15. The following table sets forth the approximatenumber of Option Holders in each of the Jurisdictions (aswell as the number of current former employees in respectof which relief is claimed) as at April 4, 2003. Followingthe exchange of options and assuming that all Option Holdersaccept the offer provided in the Option Exchange Letter, andassuming all EID Options received are exercised for EID Shares,it is expected that there will be 3,688 (3407 + 281) holdersof EID Shares with registered addresses in Canada.
Total Number of OptionHolders
Number of Former Employeeswho hold DuPont Canada Options
Newfoundland and Labrador
16. It is anticipated that, following theexchange of options and assuming that all Option Holders acceptthe offer provided in the Option Exchange Letter and assumingall EID Options are exercised for EID Shares, holders whoseregistered address is in Canada will hold, in the aggregate,substantially less than 5% of the outstanding EID Shares andwill not represent more than 5% of the total number of holdersof EID Shares.
17. With the exception of Legislation of theProvince of New Brunswick, applicable Legislation in the Jurisdictionscurrently provides exemptions from the Registration and ProspectusRequirements that would apply to permit the issuance of optionsto employees and directors of an affiliate. There are no directorsof DuPont Canada resident in the Province of New Brunswick.Accordingly, EID requires relief from the Registration andProspectus Requirements in the Province of New Brunswick withrespect to the issuance of EID Options to employees of itsaffiliate, DuPont Canada, who are resident in the Provinceof New Brunswick.
18. Although a number of former employeesand directors of DuPont Canada continue to hold DuPont CanadaOptions granted to them while they were employees of DuPont,no Jurisdiction provides a registration or prospectus exemptionto permit EID to issue EID Options to former employees ordirectors of DuPont Canada. Currently, directors of DuPontCanada are resident in the Provinces of Ontario, Québecand Manitoba and there are no former directors who are OptionHolders and who are not now either officers or employees ofDuPont Canada. However, it is possible that at the time ofthe exchange, some directors of DuPont Canada may have lefttheir position and some current employees of Dupont Canadamay no longer be employees. Accordingly, EID requires relieffrom the Registration and Prospectus Requirements of the Jurisdictionswith respect to the issuance of EID Options to former employeesand directors of DuPont Canada in accordance with the OptionExchange Letter.
19. Except in the Provinces of New Brunswickand Newfoundland and Labrador, applicable Legislation in theJurisdictions currently provides registration and prospectusexemptions for the issuance by the Administrator of EID Shareson exercise of the EID Options to employees, directors andexecutives; however, no Jurisdiction provides a registrationand prospectus exemption for the issuance by the Administratorof EID Shares to former employees and directors. It is possiblethat, at the time of the exercise of the EID Options, somedirectors of DuPont Canada may have left their position andcurrent employees may no longer be employees of DuPont Canada.Accordingly, the Administrator requires relief from the Registrationand Prospectus Requirements with respect to the issuance ofEID Shares on exercise of EID Options pursuant to the OptionExchange Letter to former employees and directors of DuPontCanada and, in addition, in the case of the Provinces of NewBrunswick and Newfoundland and Labrador in respect of theissuance of EID Shares on exercise of EID Options pursuantto the Option Exchange Letter to employees, directors, andexecutives of DuPont Canada.
20. With the exception of the Legislationof the Provinces of Québec, New Brunswick, Manitoba,and Newfoundland and Labrador, applicable Legislation in theJurisdictions currently provides, whether by rule, regulation,policy or blanket order, exemptions from the Registrationand Prospectus Requirements which might otherwise apply tofirst trades, by or through the Administrator, in EID Sharesacquired by residents of the Jurisdictions in connection withthe Option Exchange Letter. Accordingly, EID requires relieffrom the Registration Requirements in the Provinces of Québec,New Brunswick, Manitoba, and Newfoundland and Labrador andrelief from the Prospectus Requirements in the Province ofQuébec, with respect to first trades by or throughthe Administrator in EID Shares acquired on exercise of EIDOptions pursuant to the Option Exchange Letter.
AND WHEREAS under the System, the 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 Requirementsdo not apply to the issuance by EID of EID Options to OptionHolders in accordance with the terms of the Option ExchangeLetter or to the issuance by or through the Administratorof EID Shares on the exercise of EID Options by the holdersthereof in accordance with the terms of the Option ExchangeLetter, provided that the first trade in EID Shares acquiredpursuant to the Decision shall be deemed a distribution orprimary distribution to the public under the Legislation ofsuch Jurisdiction;
(b) The Registration and Prospectus Requirementsdo not apply to the first trade in EID Shares acquired pursuantto the Decision made by or through the Administrator provided,
(i) in a Jurisdiction other than Quebec,the conditions in section 2.14(1) of Multilateral Instrument45-102 - Resale of Securities are satisfied, and
(ii) in Quebec, the first trade is eithermade (A) between Option Holders or former Option Holdersor (B) through an exchange or market outside Canada.
June 3, 2003.
"Harold P. Hands"
"Robert W. Korthals"