HeadnoteMutualReliance Review System for Exemptive Relief Applications - relieffrom prospectus requirements granted in respect of trades in unitsof an employee savings fund made pursuant to a leveraged offeringby French issuer, provided that all sales of such units pursuantto the leveraged offering be made through a registrant - relieffrom registration and prospectus requirements granted in respectof trades in units of an employee savings fund made pursuant toa classic offering by French issuer -- relief from registrationand prospectus requirements upon the redemption of such unitsfor shares of the issuer - relief from the registration and prospectusrequirements granted in respect of first trade of such shareswhere such trade is made through the facilities of a stock exchangeoutside of Canada - relief granted to the manager of the Fundfrom the adviser registration requirement
ApplicableOntario Statutory ProvisionsSecuritiesAct, R.S.O. 1990, c. S.5, as am., ss. 25, 53 and 74(1).
ApplicableOntario RegulationsRegulationmade under the Securities Act, R.R.O. 1990, Reg. 1015 as am.
ApplicableRulesOSCRule 45-503 - Trades to Employees, Executives and Consultants.
OSCPolicy 4.8 - Non Resident Advisers
MultilateralInstrument 45-102 - Resale of Securities
INTHE MATTER OF
THESECURITIES LEGISLATION OF
BRITISHCOLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA,ONTARIO, QUÉBEC, NEW BRUNSWICK, NEWFOUNDLAND
ANDLABRADOR, AND NOVA SCOTIA
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
INTHE MATTER OF
WHEREASthe local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, Québec, New Brunswick, Newfoundlandand Labrador, and Nova Scotia, (collectively, the "Jurisdictions")has received an application from Aventis S.A. (the "Filer")for a decision pursuant to the securities legislation (the "Legislation")of the Jurisdictions that:
(i)the requirements contained in the Legislation to file and obtaina receipt for a preliminary prospectus and a prospectus (the"Prospectus Requirements") shall not apply to certain tradesin units (the "Units") of two French employee savings funds(fonds communs de placement d'entreprise or "FCPEs"), the AventisShares Fund (the "Classic Fund") and the Aventis Performance2002 Fund (the "Leveraged Fund" and, together with the ClassicFund, the "Funds") made pursuant to the Employee Share Offering(as defined below) to or with Qualifying Employees (as definedbelow) resident in the Jurisdictions who elect to participate(the "Canadian Participants") in the Employee Share Offering;
(ii)the requirements contained in the Legislation to be registeredto trade in a security (the "Registration Requirements") shallnot apply to certain trades in Units of the Classic Fund madepursuant to the Employee Share Offering to Canadian Participants;
(iii)the Registration and Prospectus Requirements shall not applyto the transfer of ordinary shares (the "Shares") of the Filerby the Funds to Canadian Participants upon the redemption ofUnits by Canadian Participants, nor to the issuance of Unitsof the Classic Fund to holders of Leveraged Fund Units uponthe transfer of the assets of the Leveraged Fund to the ClassicFund;
(iv)the Registration and Prospectus Requirements shall not applyto the first trade in Shares acquired by Canadian Participantsunder the Employee Share Offering, where such trade is madethrough the facilities of a stock exchange outside of Canada;and
(v)the manager of the Funds, Interépargne (the "Manager")shall be exempt from the requirements contained in the Legislationto be registered as an adviser (the "Adviser Registration Requirements")to the extent that its activities in relation to the EmployeeShare Offering require compliance with the Adviser RegistrationRequirements.
ANDWHEREAS under the Mutual Reliance Review System forExemptive Relief Applications (the "System"), the Ontario SecuritiesCommission is the principal regulator for this application;
ANDWHEREAS the Filer has represented to the Decision Makersthat:
1.The Filer is a corporation formed under the laws of France.The Filer is not and has no intention of becoming a reportingissuer (or equivalent) under the Legislation. The Shares ofthe Filer are listed on the Deutsche Börse, Euronext Parisand the New York Stock Exchange.
2.The Filer carries on business in Canada through the followingaffiliated companies: Aventis Pharma Inc., Aventis Pharma ServicesInc., Aventis Pasteur Limited, Aventis Behring Canada, Inc andDermik Laboratories Canada Inc. (the "Canadian Affiliates",together with the Filer and other affiliates of the Filer, the"Aventis Group"). Each of the Canadian Affiliates is a director indirect controlled subsidiary of the Filer and is not, andhas no intention of becoming, a reporting issuer (or equivalent)under the Legislation.
3.The Filer has established a worldwide stock purchase plan foremployees of the Aventis Group (the "Employee Share Offering")which is comprised of two plans: (i) an offering of Shares tobe subscribed through the Classic Fund (the "Classic Plan")and (ii) an offering of Shares to be subscribed through theLeveraged Fund (the "Leveraged Plan").
4.Only persons who are permanent employees of a member of theAventis Group at the time of the Employee Share Offering (the"Qualifying Employees") are eligible to participate in the EmployeeShare Offering.
5.The Filer has previously been granted exemptive relief in connectionwith a very similar employee share offering involving a classicand a leveraged plan by MRRS decision of the Decision Makers,in decisions dated November 29, 2001 and March 20, 2001.
6.The Funds are established for the purpose of implementing theEmployee Share Offering. The Funds are not and have no intentionof becoming reporting issuers (or equivalent) under the Legislation.
7.The Funds are collective shareholding vehicles of a type commonlyused in France for the conservation or custodianship of sharesheld by employee investors. Only Qualifying Employees will beallowed to hold Units of the Funds, and such holdings will bein amounts proportionate to their respective investments inthe Funds.
8.Under French law, all Units of either Fund acquired in the EmployeeShare Offering will be subject to a hold period (the "Hold Period")of approximately five years, subject to certain exceptions (suchas an earlier release on death, permanent disability, terminationof employment or retirement).
9.In the event of an early unwind resulting from the CanadianParticipant exercising one of the exceptions to the Hold Periodprescribed by French law, a Canadian Participant may redeemUnits (a) in the Classic Fund in consideration for the underlyingShares or (b) in the Leveraged Fund according to the RedemptionFormula (described below) but using the market value of theshares at the time of unwind to measure the Appreciation Amount(described below), if any, equal to the then-market value ofthe Shares held by the applicable Fund, to be settled by deliveryof such number of Shares equal to such amount.
10.At the end of the Hold Period, Canadian Participants who wishto redeem their Units may redeem their Units (a) in the ClassicFund in consideration for the underlying Shares or (b) in theLeveraged Fund according to the Redemption Formula (describedbelow), to be settled by delivery of such number of Shares equalto such amount.
11.After the end of the Hold Period and after any redemptions madeat that time, the Leveraged Fund will be dissolved and the assets(including Shares) in the Leveraged Fund which Canadian Participantswish to keep invested will be transferred to and held by theClassic Fund. Those Canadian Participants will receive equivalentUnits in the Classic Fund.
12.At any time following the end of the Hold Period, Canadian Participantsmay redeem their Units through the ClassicFund.
13.Under the Classic Plan, Canadian Participants will purchaseUnits in the Classic Fund, and the Classic Fund will subscribefor an equivalent number of Shares. The purchase price for eachUnit will be calculated as the average of the closing priceof the Shares on the 20 trading days preceding board approvalof the Employee Share Offering (the "Reference Price"), lessa 15% discount. Dividends paid on the Shares held in the ClassicFund will be capitalized and investors will be credited withadditional Units or fractions of Units.
14.Under the Leveraged Plan, Canadian Participants will purchaseUnits in the Leveraged Fund, and the Leveraged Fund will thensubscribe for Shares using the Employee Contribution (as describedbelow) and certain financing made available by a major Europeanbank, Deutsche Bank A.G. ("Deutsche Bank").
15.As with the Classic Plan, Canadian Participants in the LeveragedPlan Offering enjoy the benefit of a 15% discount in the ReferencePrice. Under the Leveraged Plan, the Canadian Participants effectivelyreceive a share appreciation entitlement in the increase invalue, if any, of the Shares financed by the Deutsche Bank Contribution(described below).
16.Participation in the Leveraged Plan represents an opportunityfor Qualifying Employees potentially to obtain significantlyhigher gains than would be available through participation inthe Classic Plan, by virtue of the Qualifying Employee's indirectparticipation in a financing arrangement involving a swap agreement(the "Swap Agreement") between the Leveraged Fund and DeutscheBank. In economic terms, the Swap Agreement effectively involvesthe following exchange of payments: for each Share which maybe purchased by the Qualifying Employee's contribution (the"Employee Contribution") under the Leveraged Plan at the ReferencePrice less the 15% discount, Deutsche Bank will lend to theFund (on behalf of the Canadian Participant) an amount sufficientto enable the Fund (on behalf of the Canadian Participant) topurchase an additional nine Shares (the "Deutsche Bank Contribution")at the Reference Price less the 15% discount.
17.At the time the Canadian Participant's obligations under theSwap Agreement are settled (the "Settlement Date") (expectedto be at the end of the Hold Period, but an early unwind mayresult from the Canadian Participant satisfying one of the exceptionsto the Hold Period prescribed by French law) the Canadian Participantwill, for each Unit held by the Canadian Participant, be entitledto retain from the proceeds of the ten Shares then held by theFund (on behalf of the Canadian Participant), an amount equalto:
(a)the current value of one Share (that would have been purchasedby the Employee Contribution); and
(b)approximately 50% of the amount of the appreciation in value,if any, of the nine Shares purchased by the Deutsche Bank Contributionabove the Reference Price for such nine Shares (that is, approximately50% of any increase in the value of such shares over the ReferencePrice) (the "Appreciation Amount").
Atthe Settlement Date, the Leveraged Fund, on behalf of the CanadianParticipant, will be required to remit an amount equal to thebalance of the proceeds of the ten Shares then owned or deemedto be owned by such Canadian Participant to Deutsche Bank. Thispayment obligation may be satisfied by the transfer of Sharesto Deutsche Bank by the Leveraged Fund.
18.Canadian Participants who wish to retain all their Shares atthe end of the Hold Period, (i.e. the Shares subscribed to bythe Leveraged Fund with their Employee Contribution and thecorresponding Deutsche Bank Contribution) may elect to pay tothe Leveraged Fund an amount equal to the amount due to DeutscheBank under the Swap Agreement in respect of such Canadian Participant'sinvestment.
19.Under French law, the Funds, as FCPEs, have limited liability.The risk statement provided to Canadian Participants will confirmthat, under no circumstances, will a Canadian Participant inthe Leveraged Plan be liable to any of the Leveraged Fund, DeutscheBank or the Filer for any amounts in excess of his or her EmployeeContribution under the Leveraged Plan.
20.For Canadian federal income tax purposes, the Units acquiredby Canadian Participants under the Leveraged Plan will representa pro rata ownership interest by the Canadian Participants inthe Shares held by the Fund, together with the Fund's rightsand obligations under the Swap Agreement, and any other assetswhich may be held by the Fund, which status will be confirmedin the offering documents provided to Canadian Participants.
21.During the term of the Swap Agreement, dividends paid on theShares held in the Leveraged Fund will be remitted to the LeveragedFund, and the Leveraged Fund will remit an equivalent amountto Deutsche Bank as partial consideration for the obligationsassumed by Deutsche Bank under the Swap Agreement.
22.For Canadian federal income tax purposes, the Canadian Participantswill be deemed to receive all dividends paid on the Shares financedby either the Employee Contribution or the Deutsche Bank Contribution,at the time such dividends are paid to the Leveraged Fund, notwithstandingthe actual non-receipt of the dividends by the Canadian Participants.Consequently, Canadian Participants will be required to fundthe tax liabilities associated with the dividends without recourseto the actual dividends.
23.The declaration of dividends on the Shares remains at the solediscretion of the board of directors of the Filer. The Filerhas not made any commitment to Deutsche Bank as to any minimumpayment in respect of dividends.
24.To respond to the fact that, at the time of the initial investmentdecision relating to participation in the Leveraged Plan, CanadianParticipants will be unable to quantify their potential incometax liability resulting from such participation, the Filer willenter into an indemnity agreement (the "Tax Indemnity Agreement")with each Canadian Participant.
25.Pursuant to the Tax Indemnity Agreement, the Filer will indemnifyCanadian Participants in the Leveraged Plan Offering for alltax costs to the Canadian Participants associated with the paymentof dividends in excess of a specified amount per Share duringthe Hold Period such that, in all cases, a Canadian Participantwill, at the time of the original investment decision, be ableto quantify, with certainty, his or her maximum tax liabilityin connection with dividends received by the Leveraged Fundon his or her behalf under the Leveraged Plan.
26.At the time the Canadian Participant's obligations under theSwap Agreement are settled (expected to occur on the SettlementDate at the end of the Hold Period), the Canadian Participantwill realize a capital gain (or capital loss) by virtue of havingparticipated in the Swap Agreement to the extent that amountsreceived by the Leveraged Fund, on behalf of the Canadian Participant,from Deutsche Bank exceed (or are less than) amounts paid bythe Leveraged Fund, on behalf of the Canadian Participant toDeutsche Bank. To the extent that dividends on Shares that aredeemed to have been received by a Canadian Participant are paidby the Fund on behalf of the Canadian Participant to DeutscheBank, such payments will reduce the amount of any capital gain(or increase the amount of any capital loss) to the CanadianParticipant under the Swap Agreement. Capital losses (gains)realized by a Canadian Participant under the Swap Agreementmay be offset against (reduced by) any capital gains (losses)realized by the Canadian Participant on a disposition of theShares, in accordance with the rules and conditions under theIncome Tax Act (Canada) or comparable provincial legislation(as applicable).
27.The Swap Agreement will terminate at the end of the Hold Period.After the final swap payments are made, the Canadian Participantmay elect to redeem the Leveraged Fund Units in considerationfor a payment of an amount equal to the value of the CanadianParticipant's Employee Contribution and the Canadian Participant'sportion of the Appreciation Amount, if any, to be settled bydelivery of such number of Shares equal to such amount (the"Redemption Formula"). Following these redemptions, all assets(including Shares) remaining in the Leveraged Fund will be transferredto the Classic Fund. New Units of the Classic Fund will be issuedto the applicable Canadian Participants in recognition of theassets transferred to the Classic Fund. The Canadian Participantsmay redeem the new Units whenever they wish.
28.The Manager is an asset management company governed by the lawsof France. The Manager is registered with the French Commissiondes Opérations de Bourse (the "COB") to manage Frenchinvestment funds and complies with the rules of the COB. TheManager is not and has no intention of becoming a reportingissuer (or equivalent) under the Legislation.
29.The Manager may, for the Fund's account, acquire, sell or exchangeall securities in the portfolio of each Fund (the "Portfolios").The Classic Fund's Portfolio will consist of Shares and, fromtime to time, cash in respect of dividends paid on the Shares.The Leveraged Fund's Portfolio will consist of Shares and theSwap Agreement. Either Portfolio may include cash or cash equivalentswhich the Funds may hold pending investments in Shares. TheManager's Portfolio management activities in connection withthe Employee Share Offering and the Funds are limited to purchasingShares from the Filer using the Employee Contribution and theDeutsche Bank Contribution, fulfilling redemption requests,and such activities as may be necessary to give effect to theSwap Agreement.
31.The Manager is also responsible for preparing accounting documentsand publishing periodic informational documents as provided bythe rules of each Fund.
32.Shares issued in the Employee Share Offering will be depositedin the relevant Fund through Natexis Banques Populaires (the "Depositary"),a French commercial bank subject to French banking legislation.
33.Under French law, the Depositary must be selected by the Managerfrom among a limited number of companies identified on a listby the French Minister of the Economy, and its appointment mustbe approved by the COB.
TheDepositary carries out orders to purchase, trade and sell securitiesin the Portfolio and takes all necessary action to allow the Fundsto exercise the rights relating to the securities held in theirrespective Portfolios.
34.The Qualifying Employees resident in Canada will not be inducedto participate in the Employee Share Offering by expectation ofemployment or continued employment.
35.The total amount invested by a Canadian Participant in the EmployeeShare Offering, including the Canadian Participant's investmentin the Classic Plan and the Leveraged Plan, may not exceed 25%of his or her gross annual compensation, although a lower limitmay be established by the Canadian Affiliates.
36.None of the Filer, the Manager, the Canadian Affiliates or anyof their employees, agents or representatives will provide investmentadvice to the Qualifying Employees with respect to an investmentin the Units.
37.The Filer has retained a registrant registered as a broker/investmentdealer under the Legislation of each Jurisdiction (the "Registrant")in connection with the Leveraged Plan to provide advisory servicesto those Canadian Participants who express interest in the LeveragedPlan, to assist them in making a determination, in accordancewith industry practices, as to whether an investment in the LeveragedPlan is suitable for each Canadian Participant based on his orher particular financial circumstances. The Registrant will establishaccounts for, and will receive the initial account statementsfrom the Leveraged Fund on behalf of, each Canadian Participant.
38.Units of the Leveraged Fund will be issued to Canadian Participantssolely through the Registrant. The Units will be evidenced byaccount statements issued by the Leveraged Fund.
39.The Canadian Participants will receive an information packagein the French or English language, at their option, that willinclude:
(a)a summary of the terms of the Employee Share Offering,
(b)a tax notice relating to the relevant Funds containing a descriptionof the Canadian income tax consequences of purchasing and holdingthe Shares and Units in the Funds, and of any anticipated taxconsequences associated with the issue to Canadian Participantsof Units in the Classic Fund in connection with the transfer ofassets from the Leveraged Fund to the Classic Fund after the HoldPeriod, and
(c)a risk statement which will describe certain risks associatedwith an investment in Units pursuant to the Leveraged Plan andconfirm certain of the income tax consequences of purchasing andholding Units in the Leveraged Fund.
40.Upon request, Canadian Participants will be entitled to receivecopies of the Filer's annual report on Form 20-F filed with theUnited States Securities and Exchange Commission (the "SEC") and/orthe French Document de Référence filedwith the COB. In addition, a copy of the Note d'Opérationwhich will be filed with the COB in respect of the Employee ShareOffering will be made available to Canadian Participants uponrequest.
41.Copies of all continuous disclosure materials relating to theFiler which are furnished to shareholders generally will be furnishedto those Canadian Participants who subscribe for Units in theFunds. Canadian Participants will also receive information aboutrestrictions on the sale of Shares received under the EmployeeShare Offering.
42.The Filer will provide contractual rights of action to those CanadianParticipants who participate in the Leveraged Plan if the offeringdocuments provided to the Canadian Participants contain a materialmisrepresentation in respect of the Leveraged Plan Offering.
43.It is not expected that there will be any market for the Unitsor Shares in Canada.
44.There are approximately 1,718 Qualifying Employees resident inCanada, in the provinces of Ontario (1,055), Québec (564),Saskatchewan (6), British Columbia (32), Alberta (27), Newfoundland(3), New Brunswick (5), Nova Scotia (13) and Manitoba (13), whorepresent in the aggregate less than 5.0% of the number of QualifyingEmployees worldwide.
45.As of the date hereof and after giving effect to the EmployeeShare Offering, Canadian residents do not and will not beneficiallyown (which term, for the purposes of this paragraph, is deemedto include all Shares held by the Funds on behalf of CanadianParticipants) more than 10 per cent of the Shares and do not andwill not represent in number more than 10 per cent of the totalnumber of holders of the Shares as shown on the books of the Filer.
ANDWHEREAS pursuant to the MRRS this Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");
ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;
TheDecision of the Decision Makers under the Legislation is that:
(a)the Prospectus Requirements shall not apply to trades of the Unitsof the Leveraged Fund to the Canadian Participants pursuant tothe Employee Share Offering, provided that all trades that aresales in a Jurisdiction are made through a dealer that is registeredas a broker/investment dealer in the Jurisdiction, and the firsttrade in such Units acquired by Canadian Participants pursuantto this Decision, in a Jurisdiction, shall be deemed a distributionor a primary distribution to the public under the Legislationof such Jurisdiction;
(b)the Registration and Prospectus Requirements shall not apply totrades in Units of the Classic Fund to the Canadian Participantspursuant to the Employee Share Offering, provided that the firsttrade in such Units acquired by Canadian Participants pursuantto this Decision, in a Jurisdiction, shall be deemed a distributionor a primary distribution to the public under the Legislationof such Jurisdiction;
(c)the Registration and Prospectus Requirements shall not apply to:
(i)trades of Shares by the Funds to the Canadian Participants uponthe redemption of Units by Canadian Participants pursuant to theEmployee Share Offering; and
(ii)the issuance of Units of the Classic Fund to holders of LeveragedFund Units upon the transfer of the assets of the Leveraged Fundto the Classic Fund;
providedthat, the first trade in any such Shares or Units acquired bya Canadian Participant pursuant to this Decision, in a Jurisdiction,shall be deemed a distribution or a primary distribution to thepublic under the Legislation of such Jurisdiction;
(d)the Registration and Prospectus Requirements shall not apply tothe first trade in any Shares acquired by a Canadian Participantunder the Employee Share Offering provided that such trade is:
(i)made through a person or company who/which is appropriately licensedto carry on business as a broker/dealer (or the equivalent) underthe applicable securities legislation in the foreign jurisdictionwhere the trade is executed; and
(ii)executed through the facilities of a stock exchange outside ofCanada; and
(e)the Manager shall be exempt from the Adviser Registration Requirements,where applicable, in order to carry out the activities describedin paragraphs 29 and 31 hereof.
"TheresaMcLeod" "H.Lorne Morphy"