Subsections 74(1) and 104(2)(c) - relief fromregistration requirements granted in connection with resaleof shares acquired under employee stock option plans by formeremployees and permitted transferees subject to certain conditions-relief from issuer bid requirements granted in connection withacquisitions of securities from employees, former employees,and permitted transferees at a price determined under the plan.
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 35, 74(1), 95, 96, 97, 98, 100 and 104(2)(c).
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., ss. 183.
OSC Rule 45-503 - Trades to Employees, Executivesand Consultants.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O.1990,
CHAPTER S.5 AS AMENDED (THE"ACT")
IN THE MATTER OF
ZIMMER HOLDINGS, INC.
RULING and ORDER
(Subsections 74(1) and 104(2)(c))
UPON the application of Zimmer Holdings,Inc. (the "Applicant") to the Ontario Securities Commission(the "Commission") for:
(a) a ruling under subsection 74(1) of theAct that the registration requirement contained in section25 of the Act (the "Registration Requirement")shall not apply to certain first trades in the capital ofthe Applicant (the "Shares") issued pursuant tothe Zimmer Holdings, Inc. 2001 Stock Incentive Plan (the"2001 Plan") and TeamShare Stock Option Plan (the"TeamShare Plan")(the 2001 Plan and the TeamSharePlan are collectively, the "Plans"); and
(b) an order under clause 104(2)(c) of theAct that sections 95, 96, 97, 98, and 100 of the Act andsection 203.1 of the regulation made under the Act (collectively,the "Issuer Bid Requirements") shall not applyto acquisitions by the Applicant of Shares pursuant to theterms of the Plans;
AND UPON considering the Applicationand the recommendation of staff of the Commission;
AND UPON the Applicant having representedto the Commission that:
1. The Applicant is a corporation incorporatedunder the laws of the State of Delaware, is not a reportingissuer under the Act, and does not intend to become a reportingissuer under the Act.
2. The authorized share capital of the Applicantconsists of 1,000,000,000 Shares and 250,000,000 shares ofpreferred stock ("Preferred Shares"). As of July31, 2002, there were 194,068,120 Shares and 0 Preferred Sharesissued and outstanding.
3. The Applicant is subject to the requirementsof the Securities Exchange Act of 1934, as amended,of the United States.
4. Subject to adjustment as provided in thePlans, a maximum of 27,500,000 and 5,500,000 Shares have beenreserved for issuance pursuant to the 2001 Plan and TeamSharePlan, respectively.
5. The purpose of the 2001 Plan is to providethe incentive of Share ownership to the officers and key employeesof the Applicant and its affiliates (collectively, the "ZimmerCompanies").
6. The purpose of the TeamShare Plan is togive substantially all employees a stake in the Applicant'sfuture growth, in the form of options to acquire Shares ("Options").
7. The Shares offered under the Plans areregistered with the United States Securities and ExchangeCommission (the "SEC") under the Securities Actof 1933 of the United States.
8. The Shares are listed on the New York StockExchange (the "NYSE").
9. Under the Plans, Options, stock appreciationrights, restricted stock, restricted share units, share purchaserights and other stock-based awards (collectively, the "Awards")may be granted to employees of the Zimmer Companies.
10. The Zimmer Companies will identify employeesto be granted Awards in Ontario under the Plans ("OntarioEmployees"). As of September 19, 2002, there were approximately37 Ontario Employees eligible to participate in the Plans.
11. The Applicant intends to engage the servicesof one or more agents/brokers (the "Agents") inconnection with the administration and operation of the Plans.The current Agents for the Plans are Mellon Investor Services("Mellon") and its preferred broker FutureShareFinancial LLC ("FutureShare").
12. Neither Mellon nor FutureShare are registrantsin Ontario. Mellon and FutureShare are registered under applicableUnited States securities or banking legislation.
13. If Mellon or FutureShare are replacedas the Agents, or if any additional Agents are appointed,any such Agents will be registered in Ontario or under applicableUnited States securities or banking legislation.
14. The Agents' role in the Plans may include:(a) assisting with the administration of the Plans, includingrecord-keeping functions; (b) facilitating the exercise ofAwards granted under the Plans; (c) holding Shares issuedunder the Plans on behalf of participants under the Plansand maintaining related accounts; and (d) facilitating theresale of the Shares issued in connection with the Plans throughthe NYSE.
15. Participation in the Plans by OntarioEmployees is voluntary and such Ontario Employees are notinduced to participate in the Plans or to exercise their Awardsby expectation of employment or continued employment withthe Zimmer Companies.
16. The Plans are administered under the supervisionof the board of directors (the "Board") of the Companywhich shall exercise certain of its powers through a committeeappointed by the Board (the "Committee").
17. The exercise price of an Award may bepaid in cash, cash equivalent, or where permitted by the Boardor the Committee, by way of a cashless exercise, promissorynote, stock-swap exercise, or such other method as permittedby the Board or the Committee from time to time. A stock-swapexercise ("Stock-Swap Exercise") would permit anOntario Employee to pay the exercise price of an Award bytendering Shares already owned. Some Shares issued upon theexercise of an Award may also be withheld in payment of withholdingtaxes or exercise costs ("Withholding Acquisitions").
18. Generally, Awards may not be assigned,transferred, pledged or otherwise disposed of other than bywill or the laws of intestacy. However, under the 2001 Plan,the Board or the Committee may provide that Awards may betransferred to members of the Award holder's immediate family,to one or more trusts solely for the benefit of such immediatefamily members and to partnerships in which such family membersor trust are the only partners (collectively, "PermittedTransferees"). The purpose of any such assignments ortransfers under the Plans is to facilitate tax planning byOntario Employees and they will occur for either no considerationor nominal consideration. For purposes of the 2001 Plan, immediatefamily means the Award holder's spouse, parents, children,stepchildren, grandchildren or legal dependents.
19. Following the termination of an OntarioEmployee's relationship with the Zimmer Companies, a formerOntario Employee, or in some cases the beneficiary of an OntarioEmployee or Former Ontario Employee by a designation or bywill or the laws of intestacy, (collectively, the "Non-EmployeeParticipants") may continue to have rights in respectof the Plans. Post-termination rights may include, among otherthings, the right of a Non-Employee Participant to exercisean Award for a specified period following termination.
20. A copy of the United States prospectusrelating to the Plans will be delivered to each Ontario Employeewho is granted an Award under the Plans. The annual reports,proxy materials, and other materials the Applicant is requiredto file with the SEC will be provided or made available topersons who acquire Shares under the Plans and become shareholdersat the same time and in the same manner as the documents areprovided or made available to United States shareholders.
21. Ontario Employees, Non-Employee Participants,and Permitted Transferees who wish to resell Shares acquiredunder the Plans may do so over the NYSE through the Agents.
22. As of September 1, 2002, residents ofCanada did not own, directly or indirectly, more than 10%of the outstanding Shares and did not represent in numbermore than 10% of the total number of owners, directly or indirectly,of the Shares.
23. For any trades that the Applicant makeswith or to an Ontario Employee under the Plans, the Applicantand the Agents intend to rely upon exemptions from sections25 and 53 of the Act contained in Rule 45-503 Trades to Employees,Executors and Consultants (the "Employee Rule").The Agents and Ontario Employees may also rely upon an exemptionfrom the Registration Requirement in the Employee Rule forfirst trades in Shares acquired under the Plans.
24. An exemption from the Registration Requirementis not currently provided in the Employee Rule for first tradesin Shares acquired under the Plans by Non-Employee Participantsor Permitted Transferees.
25. Any Shares acquired by the Applicant undera Stock-Swap Exercise or Withholding Acquisition will eitherbe cancelled by the Applicant or put into the Applicant'streasury. The exemption in the Act from the Issuer Bid Requirementsis not available for these acquisitions by the Company sincethey will occur at fair market value as defined in the Plansas opposed to at "market price", as that term isdefined in subsection 183(1) of the Regulation. The exemptionin the Act from the Issuer Bid Requirements may also be unavailableas some of these acquisitions may be made from persons otherthan Ontario Employees.
AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;
IT IS RULED, pursuant to subsection 74(1)of the Act, that the first trade by Non- Employee Participantsand Permitted Transferees effected through the Agents in Sharesacquired under the Plans will not be subject to the RegistrationRequirement, provided that:
(i) such first trade is executed througha stock exchange or market outside of Canada;
(ii) the Applicant is not a reporting issuerunder the Act at the time the overlying Award is issued;and
(iii) residents of Ontario did not own directlyor indirectly more than 10 percent of the outstanding Sharesand did not represent in number more than 10 percent ofthe total number of direct or indirect owners at the timethe overlying Award is issued.
AND IT IS ORDERED, pursuant to clause104(2)(c) of the Act that the Issuer Bid Requirements will notapply to the acquisition by Zimmer of Shares from Employees,Non-Employee Participants or Permitted Transferees providedthat such acquisitions are made in accordance with the termsof the Plans.
October 1, 2002.
"Howard I. Wetston" "HaroldP. Hands"