Mutual Reliance Review System for Exemptive Relief Applications - reliefgranted from the registration and prospectus requirements for trades in options,and shares acquired on the exercise of options, under an employee stock optionplan - relief also granted from the registration and prospectus requirements forany resale of shares acquired under the plans - relief from the issuer bidrequirements in respect of the purchase by the issuer of shares tendered byOntario employees, officers and directors in payment of the exercise price and/orapplicable taxes - exemption not available because of the method of calculationof market price under the plans.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 93(3)(d)(i), 95 to 100, and104(2)(c).
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
KPMG CONSULTING, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Manitoba, Ontario and NovaScotia (the "Jurisdictions") has received an application from KPMG Consulting, Inc.("KCI") for a decision under the securities legislation of the Jurisdictions (the"Legislation") that:
1. the requirements contained in the Legislation to be registered to trade in asecurity (the "Registration Requirement") and to file and obtain a receipt fora preliminary prospectus and a prospectus in respect of such security (the"Prospectus Requirement") shall not apply to the intended trades insecurities of KCI under its 2000 Long-Term Incentive Plan, as amended fromtime to time (the "Plan"); and
2. the requirements contained in the Legislation to comply with the issuer bidrules in the Legislation (the "Issuer Bid Requirements") do not apply to theacquisition of common stock by KCI under the Plan;
AND WHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Executive Director of the British ColumbiaSecurities Commission is the principal regulator for this application;
AND WHEREAS KCI has represented to the Decision Makers that:
1. KCI is a corporation incorporated under the laws of the state of Delaware;
2. KCI is not, and has no present intention of becoming, a reporting issuer orthe equivalent under the Legislation of any of the Jurisdictions;
3. the authorized share capital of KCI consists of 1,000,000,000 shares ofcommon stock, and 10,000,000 shares of preferred stock of whichapproximately 381,000,000 and 5,000,000, respectively, were issued andoutstanding as of January 31, 2000;
4. KCI proposes to carry out a registered public offering in the United Statesand, KCI proposes to make an application to list its common stock on theNew York Stock Exchange;
5. KCI proposes to grant options, stock appreciation rights and stock-basedawards (collectively, "Awards") under the Plan to Canadian residentemployees (the "Employees") of KPMG Consulting LP (the "CanadianPartnership") and the Awards are convertible into common stock of KCI;
6. as of March 1, 2000, there were 748 Employees resident in the Jurisdictionseligible to participate in the Plan;
7. Awards granted under the Plan may only be transferred by Employees withthe approval of the compensation committee of KCI and any such transferswill be made in accordance with the applicable Legislation;
8. participation in the Plan is voluntary and Employees are not induced toparticipate in the Plan by expectation of employment or continuedemployment;
9. the Canadian Partnership is a limited partnership established under the lawsof Ontario;
10. all of the general partner and limited partner interests of the CanadianPartnership will be held, directly or indirectly by a private corporation to beestablished under Ontario law ("KCI Canada").
11. all of the outstanding shares of KCI Canada will be beneficially owned,directly or indirectly, by KCI;
12. neither the Canadian Partnership nor KCI Canada is, or has any presentintention of becoming a reporting issuer or the equivalent under theLegislation of any of the Jurisdictions;
13. the terms of the Plan include provisions (the "Payment-in-Kind Provisions")permitting Employees who exercise Awards granted under the Plan to paythe exercise price of such Awards and/or related taxes by tenderingpreviously issued shares of common stock of KCI to KCI directly or byattestation procedures;
14. the terms of the Plan provide that KCI shall acquire its common stock underthe Payment-in-Kind Provisions at a price equal to the closing price of thecommon stock on the New York Stock Exchange on the date of acquisitionby KCI of such shares;
15. all sales of common stock made by Employees under the Plan will be madethrough the facilities of, and in accordance with the rules of, the New YorkStock Exchange, another stock exchange or organized market outside ofCanada and through a registrant registered under the Legislation or anotherentity registered as a broker dealer under the Securities Exchange Act of1934 (the "U.S. Registrant");
16. KCI and the Canadian Partnership are not "affiliates" within the meaning ofthe Legislation;
17. participants in the Jurisdictions will be provided with a copy of the Plan andall disclosure material relating to KCI which is provided to participantsresident in the United States, as well as a copy of this Decision Document;
18. if at any time the number of participants in any one Jurisdiction who acquirecommon stock under the Plan exceeds 10% of the total number of holdersof common stock, or if the participants in any one Jurisdiction hold, inaggregate, in excess of 10% of the total number of issued and outstandingcommon stock, KCI will apply to the relevant Decision Maker for an orderwith respect to further trades by the participants in that Jurisdiction incommon stock acquired under the Plan;
19. there is no market in the Jurisdictions for the common stock and none isexpected to develop;
20. the Legislation of certain of the Jurisdictions does not contain exemptionsfrom the Prospectus Requirement and/or Registration Requirement forintended trades in Awards or common stock under the Plan; and
21. the Legislation of certain of the Jurisdictions deems any trade in commonstock acquired under the Plan to be a distribution unless, among otherthings, KCI is a reporting issuer and has been a reporting issuer for the 12months immediately preceding the trade;
AND WHEREAS under the System this MRRS Decision Documentevidences
the decisions of each Decision Maker (collectively, the "Decision");
AND WHEREAS each Decision Maker is satisfied that the test contained inthe
Legislation that provides the Decision Maker with the jurisdiction to make theDecision has
THE DECISION of the Decision Makers under the Legislation is that:
(a) the Registration Requirement and Prospectus Requirement shall not applyto an intended trade in Awards and common stock under the Plan;
(b) the Registration Requirement shall not apply to an intended trade by anEmployee through a U.S. Registrant in common stock acquired under thePlan;
(c) an intended trade in common stock acquired by Employees under the Planis a distribution under the Legislation unless the trade is executed throughthe facilities of a stock exchange or organized market outside of Canada andin accordance with all the laws and rules applicable to such stock exchangeor market;
(d) the Issuer Bid Requirements do not apply to acquisition of common stock byKCI under the Payment-in-Kind Provisions of the Plan.
March 29th, 2000.