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Rohm and Haas Company - MRRS Decision
Headnote
MRRS - registration relief for trades by formeremployees and permitted transferees of securities acquired underemployee incentive plans - issuer bid relief for foreign issuerin connection with acquisition of shares under employee incentiveplans.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.
Applicable Ontario Rule
OSC Rule 45-503 - Trades to Employees, Executivesand Consultants.
Applicable Instrument
Multilateral Instrument 45-102 - Resale of Securities.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, ALBERTA, SASKATCHEWANAND
NOVA SCOTIA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ROHM AND HAAS COMPANY
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, Alberta, Saskatchewan and Nova Scotia (the "Jurisdictions")has received an application from Rohm and Haas Company ("Rohmand Haas" or the "Company") for a decision pursuantto the securities legislation of the Jurisdictions (the "Legislation")that (i) the requirement contained in the Legislation to beregistered to trade in a security (the "Registration Requirement")will not apply to certain trades in securities of Rohm and Haasthat were acquired in connection with the Rohm and Haas Amendedand Restated Stock Plan (the "Plan"); and (ii) therequirements contained in the Legislation relating to the deliveryof an offer and issuer bid circular and any notices of changeor variation thereto, minimum deposit periods and withdrawalrights, take-up and payment for securities tendered to an issuerbid, disclosure, restrictions upon purchases of securities,financing, identical consideration, collateral benefits, togetherwith the requirement to file a reporting form within ten (10)days of an exempt issuer bid and pay a related fee (the "IssuerBid Requirements") will not apply to certain acquisitionsby the Company of Shares (as defined below) pursuant to thePlan in each of the Jurisdictions;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS Rohm and Haas has representedto the Decision Makers as follows:
1. Rohm and Haas is presently a corporationincorporated under the laws of the state of Delaware. Theexecutive office of Rohm and Haas is located in Philadelphia,Pennsylvania.
2. Rohm and Haas and affiliates of Rohm andHaas ("Rohm and Haas Affiliates") (Rohm and Haasand Rohm and Haas Affiliates are, collectively, the "Rohmand Haas Companies") are manufacturers of specialty chemicals.
3. The Company is registered with the SecuritiesExchange Commission ("SEC") in the U.S. under theU.S. Securities Exchange Act of 1934 ("ExchangeAct") and is not exempt from the reporting requirementsof the Exchange Act pursuant to Rule 12g 3-2 made thereunder.
4. Rohm and Haas is not a reporting issuerin any Jurisdiction and has no present intention of becominga reporting issuer in any Jurisdiction.
5. The authorized share capital of Rohm andHaas consists of 400,000,000 shares of common stock ("Shares").
6. The Shares are listed for trading on theNew York Stock Exchange ("NYSE").
7. Rohm and Haas intends to use the servicesof one or more agents/brokers (each, an "Agent")under the Plan. The current Agent for the Plan is SalomonSmith Barney, Inc. ("SSB"). SSB is registered inthe U.S., but not in the Jurisdictions, and, if replaced,or if an additional Agent is appointed, such replacement Agentor additional Agent is not expected to be so registered inthe Jurisdictions. The replacement Agent or additional Agentwill be registered under applicable U.S. securities or bankinglegislation to trade in securities, if required under suchlegislation, and will be authorized by Rohm and Haas to provideservices under the Plan.
8. The Agent's role in the Plan may include:(a) disseminating information and material to Participantsin connection with the Plan; (b) assisting with the administrationof the Plan, including record-keeping functions; (c) facilitatingthe exercise of Awards (as defined below) granted under thePlan (including cashless and stock-swap exercises); (d) holdingShares issued under the Plan on behalf of Participants (asdefined below), Former Participants (as defined below) andPermitted Transferees (as defined below) in limited brokerageaccounts; (e) facilitating the resale of Shares issued inconnection with the Plan; (f) facilitating the reacquisitionof Awards under the terms of the Plan; and (g) facilitatingthe payment of withholding taxes, if any, by cash or the tenderingor withholding of Shares.
9. The Shares issued under the Plan will bepreviously authorized but unissued Shares or reacquired Shares,whether bought on the market or otherwise.
10. Subject to adjustment as provided in thePlan, the maximum number of Shares which may be issued pursuantto the Plan is 19 million.
11. Employees who participate in the Planwill not be induced to purchase Shares by expectation of employmentor continued employment.
12. The Plan is administered by the boardof directors ("Board") of the Company and/or a committeeappointed by the Board ("Committee").
13. Under the Plan options exercisable forShares ("Options") and restricted stock ("RestrictedStock") (collectively "Awards") may be grantedto employees of Rohm and Haas and its affiliates ("Participants").
14. The purpose of the Plan is to attractand retain employees, to motivate Participants by means ofappropriate incentive, to achieve long-range goals, to provideincentive compensation opportunities that are competitivewith those of other similar companies and to further identifyParticipants' interests with those of the Company's otherstockholders through stock compensation, thereby promotingthe long-term financial interest of the Company and its stockholders.
15. The Committee may, in its sole discretion,grant Options to eligible Participants. Each Option grantedunder the Plan will be evidenced by an Option agreement ("OptionAgreement").
16. As of March 1, 2002, there were 23 Participantsin Canada eligible to receive Options under the Plan: 14 Participantsin Ontario; 1 Participant in Alberta; 1 Participant in Saskatchewan;6 Participants in Quebec; and 1 Participant in Nova Scotia.
17. Subject to the provisions of the Plan,the Committee has the sole authority to determine the numberof Shares covered by each Option and the conditions and limitationsapplicable to the exercise of the Option.
18. Options shall be exercisable at such timesand subject to such terms and conditions as the Committeemay specify, provided that no Option shall be exercisableafter the expiration of ten years and one month from the dateof grant.
19. The exercise price ("Exercise Price")for Options will be specified in the Option Agreement andwill be established at the discretion of the Committee, provided,however, that the Exercise Price per Share for an Option shallbe not less than the Fair Market Value (as defined in thePlan) of a Share on the effective date of grant of the Option.
20. Generally, Fair Market Value for the purposesof the Plan shall equal the mean of the high and low priceof the Shares on the NYSE on the date of grant.
21. The Committee shall establish proceduresgoverning the exercise of Options. Generally, in order toexercise an Option, a Participant, Former Participant or PermittedTransferee must submit to Rohm and Haas or the Agent a noticeof exercise in the form and manner prescribed by the Committee("Notice of Exercise") identifying the Option andnumber of Shares being purchased, together with full paymentfor the Shares.
22. The Notice of Exercise shall specify whichof the following types of exercise will be used to pay theExercise Price and other costs, if any:
(a) a regular Option exercise. If the Optionholder requests a regular Option exercise, the Option holdershall deliver the full Exercise Price and applicable withholdingtaxes and transaction fees, if any (collectively, "ExerciseCosts") in cash or cash equivalents to the Agent orto Rohm and Haas at the time of exercise. Following receiptof the Exercise Price and applicable withholding taxes,Rohm and Haas shall issue the Shares underlying the Optionsto the Agent or directly to the Option holder;
(b) if permitted by the Committee, an Optionexercise and sale of all Shares being purchased throughthe Option exercise ("Cashless for Cash Exercise").If the Option holder requests a Cashless for Cash Exercise,the Option holder shall deliver an irrevocable directionto the Agent to sell all of the Shares underlying the Optionbeing exercised. Upon receipt of such direction, the Agentshall sell the Shares as soon as practicable and, upon settlementof the trade, transfer to Rohm and Haas from the proceedsof the sale an amount equal to the Exercise Price and withholdingtaxes for the Shares purchased. As soon as practicable thereafter,the proceeds from the sale of the Shares (less the ExerciseCosts) shall be delivered to the Option holder;
(c) if permitted by the Committee, an Optionexercise and sale of a sufficient number of Shares to coverthe Exercise Costs of the Shares being purchased throughthe Option exercise, with the remainder of the Shares tobe issued to the Option holder or the Agent on the holder'sbehalf ("Cashless for Stock Exercise"). If theOption holder requests a Cashless for Stock Exercise, theOption holder shall deliver an irrevocable direction tothe Agent to sell the portion of the Shares underlying theOption sufficient to pay the Exercise Costs. Upon receiptof such direction, the Agent shall sell the applicable numberof Shares as soon as practicable and, upon settlement ofthe trade, transfer to Rohm and Haas an amount equal tothe Exercise Price and withholding taxes for the Sharespurchased. As soon as practicable thereafter, the remainingShares (less the Shares sold to pay the Exercise Costs),shall be delivered to the Option holder or the Agent onhis or her behalf, provided, however, that the Option holdershall receive cash in lieu of any fractional Shares;
(d) if permitted by the Committee, an Optionexercise and surrender of Shares already owned by the Optionholder having a Fair Market Value equal to the ExerciseCosts ("Stock-Swap Exercise"). If an Option holderrequests a Stock-Swap Exercise, that Option holder mustdeliver to the Agent Shares owned by the Option holder havingan aggregate Fair Market Value equal to the Exercise Costs.As soon as practicable thereafter, the applicable numberof Shares will be delivered to the Option holder or to theAgent on behalf of the Option holder;
(e) if permitted by the Committee, the ExerciseCosts may be paid according to a deferred payment arrangementwith the Option holder; and
(f) in any other form of legal considerationthat may be acceptable to the Committee.
23. Unless otherwise determined by the Committee,Options shall not be transferable except by will or the lawsof descent and distribution.
24. Following the termination of a Participant'srelationship with the Rohm and Haas Companies for reasonsof disability, retirement, "Change of Control" (asdefined in the Plan), or any other reason ("Former Participant")and on the death of a Participant where the Option has beentransferred by will or pursuant to the laws of intestacy ("PermittedTransferees") the Former Participants and Permitted Transfereeswill continue to have rights in respect of the Plan ("Post-TerminationRights"). Post-Termination Rights may include, amongother things, the right of a Former Participant to exercisean Option for a period determined in accordance with the Planfollowing termination and the right to sell Shares acquiredunder the Plan through the Agent. Post-Termination Rightswill only be issued when the right to receive them was earnedby a Participant while that Participant still had a relationshipwith Rohm and Haas.
25. The sale of Shares acquired under thePlan may be made by Participants, Former Participants or PermittedTransferees through the Agent.
26. As there is no market for the Shares inCanada and none is expected to develop, it is expected thatthe resale by Participants, Former Participants and PermittedTransferees of the Shares acquired under the Plan will beeffected through the NYSE.
27. As at March 1, 2002, Canadian shareholdersdid not hold, directly or indirectly, more than 10% of theissued and outstanding Shares of the Company and did not constitutemore than 10% of the shareholders of the Company. If at anytime during the currency of the Plan Canadian shareholdersof the Company hold, in aggregate, greater than 10% of thetotal number of issued and outstanding Shares or if such shareholdersconstitute more than 10% of all shareholders of the Company,the Company will apply to the relevant Jurisdiction for anorder with respect to further trades to and by Participantsin that Jurisdiction in respect of Shares acquired under thePlan.
28. All necessary securities filings havebeen made in the U.S. in order to offer the Plan to Participantsof the Rohm and Haas Companies resident in the U.S.
29. A prospectus prepared according to U.S.securities laws describing the terms and conditions of thePlan will be delivered to each employee who is granted anOption under the Plan. The annual reports, proxy materialsand other materials Rohm and Haas is required to file withthe SEC will be provided or made available to Canadian Participantsat the same time and in the same manner as the documents areprovided or made available to U.S. Participants.
30. Rohm and Haas is authorized to withholdfrom any Award granted the amount of withholding taxes duein respect of the Award or payment under the Plan and to takesuch other action as may be necessary in the discretion ofthe Committee to satisfy all obligations for the payment ofsuch taxes ("Share Withholding Exercises").
31. After a "Change in Control"(as defined in the Plan), the Committee has the discretionto permit a Participant holding certain Awards to elect tosurrender all or part of the Awards of the Company and toreceive a cash amount from the Company at a price equal tothe Change of Control Price (as defined in the Plan) ("AwardRepurchase Rights").
32. The Committee may, in its sole discretion,grant Restricted Stock to Participants which shall be evidencedby a restricted stock purchase agreement ("RestrictedStock Purchase Agreement") which shall be in such formand shall contain such terms and conditions as the Committeeshall deem appropriate.
33. In the event a Participant's status terminates,the Company may repurchase or otherwise reacquire any or allof the Shares held by the Participant which have not vestedas of the date of termination under the terms of the RestrictedStock Purchase Agreement ("Restricted Stock Acquisitions").
34. Pursuant to the Plan, the acquisitionof Shares by the Company in the following circumstances mayconstitute an "issuer bid": Stock Swap Exercises,Award Repurchase Rights, Restricted Stock Acquisitions andShare Withholding Exercises.
35. The issuer bid exemptions in the Legislationmay not be available for such acquisitions by the Companysince such acquisitions may occur at a price that is not calculatedin accordance with the "market price," as that termis defined in the Legislation and may be made from PermittedTransferees.
36. When the Agents sell Shares on behalfof Former Participants and Permitted Transferees, the Agents,Former Participants and Permitted Transferees may not be ableto rely upon the exemptions from the Registration Requirementcontained in the Legislation of the Jurisdictions.
AND WHEREAS pursuant to the System, thisDecision 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 pursuantto the Legislation is that:
(a) the Registration Requirement shall notapply to trades in Shares by Former Participants or PermittedTransferees, including trades effected through the Agent,provided that the conditions in subsection 2.14(1) of MultilateralInstrument 45-102 Resale of Securities are satisfied; and
(b) the Issuer Bid Requirements shall notapply to the acquisition by Rohm and Haas of Shares andAwards from Participants, Former Participants or PermittedTransferees provided such acquisitions are made in accordancewith the provisions of the Plan.
October 15, 2002.
"Howard I. Wetston" "KerryD. Adams"