Adobe Systems Incorporated - MRRS Decision
Headnote
MRRS - registration relief for trades by Participants,Former Participants and Permitted Transferees of securitiesacquired under employee incentive plans - issuer bid relieffor foreign issuer in connection with acquisition of sharesunder employee incentive plans.
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
BRITISH COLUMBIA AND ONTARIO
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ADOBE SYSTEMS INCORPORATED
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in Ontarioand British Columbia (the "Jurisdictions") has receivedan application from Adobe Systems Incorporated ("Adobe"or the "Company") for a decision pursuant to the securitieslegislation 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 a prospectus (the "Prospectus Requirements") willnot apply to first trades of shares of Adobe common stock (the"Shares") acquired under the Adobe 1999 Non-StatutoryStock Option Plan (the "1999 Plan"), the Adobe 1997Employee Stock Purchase Plan (the "ESPP), and the Adobe1994 Stock Option Plan (the "1994 Plan") (the 1999Plan, the ESPP and the 1994 Plan are collectively, the "Plans")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 Adobe has represented tothe Decision Makers as follows:
1. Adobe is presently a corporation in goodstanding incorporated under the laws of the State of Delaware.
2. The Company is registered with the SecuritiesExchange Commission (the "SEC") in the U.S. underthe U.S. Securities Exchange Act of 1934 and is not exemptfrom the reporting requirements of the Exchange Act pursuantto Rule 12g3-2.
3. On or about February 1, 2002, Adobe andAccelio Corporation ("Accelio") entered into anagreement under the terms of which approximately 1.81 millionShares of Adobe were exchanged for Accelio securities on April12, 2002. The acquisition of Accelio by Adobe (the "AccelioTransaction") was structured as a plan of arrangementinvolving Adobe, Accelio and an affiliate of Adobe that isa Cayman Islands limited partnership. An application for discretionaryrelief was submitted by Adobe to certain regulatory authoritiesin Canada in connection with the Accelio Transaction and anMRRS Decision document dated April 7, 2002 was rendered bysuch regulators.
4. Adobe was not a reporting issuer in eitherof the Jurisdictions but, as a result of the Accelio Transaction,Adobe became a reporting issuer in Alberta, Quebec and Saskatchewan.Adobe is not a reporting issuer in Ontario and has no presentintention of becoming a reporting issuer in Ontario. The majorityof directors and the majority of senior officers of Adobereside outside of Canada.
5. The authorized share capital of Adobe consistsof: 900,000,000 Shares with a par value of U.S.$.0001; and2,000,000 shares of preferred stock ("Preferred Shares")with a par value of U.S.$.0001. As of October 7, 2002 therewere 240,019,082 Shares, and no Preferred Shares issued andoutstanding.
6. The Shares are quoted on Nasdaq under theticker symbol "ADBE" but are not listed or quotedon any Canadian stock exchange or market.
7. Adobe uses the services of agents/brokersin connection with the operation of the Plans (each an "Agent").E*Trade Canada Securities Corporation ("E*Trade Canada")and E*Trade Securities, Inc. ("E*Trade U.S.") haseach been appointed as an Agent under the Plans. E*Trade Canadais registered to conduct retail trades in securities in bothof the Jurisdictions; however, E*Trade U.S. is not so registered.E*Trade U.S. is registered to conduct retail trades underapplicable U.S. securities or banking legislation and anyother Agent appointed in addition to, or in replacement of,E*Trade Canada or E*Trade U.S. will be a registrant to conductretail trades in the Jurisdictions or a corporation registeredto conduct retail trades under applicable U.S. securitiesor banking legislation and will be authorized by Adobe toprovide services as an Agent under the Plans.
8. The role of the Agent may include: (a)disseminating information and materials to Participants (asdefined below) in connection with the Plans; (b) assistingwith the administration of and general record keeping forthe Plans; (c) holding Shares on behalf of Participants, FormerParticipants (as defined below) and Permitted Transferees(as defined below) in limited purpose brokerage accounts;(d) facilitating Option (as defined below) exercises (includingcashless exercises) under the Plans; (e) facilitating thepayment of withholding taxes, if any, by cash or withholdingof Shares; (f) facilitating the reacquisition of Shares andoptions for Shares ("Options") (Options and Sharesare together "Awards") under the terms of the Plans;and (g) facilitating the resale of Shares issued in connectionwith the Plans.
9. The purpose of the 1994 Plan and the 1999Plan (collectively, the "SOPs") is to advance theinterests of Adobe and its affiliates (the "Adobe Affiliates")(Adobe and the Adobe Affiliates are, collectively, the "AdobeCompanies") and its stockholders by providing an incentiveto attract, retain and reward employees ("Employees")and consultants ("Consultants") (Employees and Consultantsare, collectively, "Participants") of the AdobeCompanies and by motivating the Participants to contributeto the growth and profitability of the Adobe Companies. Thepurpose of the ESPP is to provide Employees with an opportunityto acquire a proprietary interest in the Company through thepurchase of Shares.
10. Subject to adjustment from time to time,the maximum number of Shares that may currently be issuedpursuant to the Plans are: 29,200,000 Shares under the 1994Plan; 40,700,000 Shares under the 1999 Plan and 38,000,000Shares under the ESPP. From time to time Adobe may increasethe maximum number of Shares issuable under the Plans.
11. The SOPs permit grants of Options to Participantsincluding prospective Employees and prospective Consultantsresident in the Jurisdictions. Unless a Participant is promotedto a position that makes such Participant eligible to receivean Option grant under the 1994 Plan, no new grants will bemade to Participants under the 1994 Plan.
12. Under the ESPP, Employees are offeredan opportunity to purchase Shares by means of applying accumulatedpayroll deductions to the purchase of Shares at a discountedprice determined in accordance with the terms of the ESPP.
13. Employees of the Adobe Companies eligibleto participate in the Plans will not be induced to purchaseShares or exercise Options by expectation of employment orcontinued employment.
14. Consultants of the Adobe Companies eligibleto participate in the Plans who participate in the Plans willnot be induced to purchase Shares or exercise Options by expectationof the individual Consultant, the Consultant's company orthe Consultant's partnership being engaged or continuing tobe engaged as a Consultant.
15. Officers of the Adobe Companies who participatein the Plans will not be induced to purchase Shares or exerciseOptions by expectation of appointment or employment or continuedappointment or employment as an officer.
16. It is anticipated that Consultants whohave been or will be granted Options under the 1999 Plan,to the extent permitted, will: (a) provide technical, business,management or other services to the Adobe Companies (otherthan services relating to the sale of securities or promotional/investorrelations services); (b) provide consulting services to theAdobe Companies under a written contract; (c) have a relationshipwith the Adobe Companies that will permit them to be knowledgeableabout the business and affairs of the Adobe Companies; and(d) will spend a significant amount of time and attentionon the affairs and business of the Adobe Companies.
17. As of October 7, 2002, there were 299Participants in Canada eligible to receive Awards under thePlans: 273 Participants resident in Ontario; 2 Participantsresident in British Columbia and 24 Participants residentin Quebec.
18. The SOPs are administered by a committeeappointed by the board of directors of Adobe (the "Committee").
19. Generally, in order to exercise an Optiongranted under the SOPs, an optionee must submit a writtennotice of exercise to Adobe or to the Agent identifying theOption, the number of Shares being purchased, and the methodof payment.
20. The SOPs provide that on exercise of Options,the payment of the exercise price in order to acquire theShares of the Company may be made (a) in cash, (b) a cashlessexercise, (c) by a combination of the foregoing, or (d) suchother consideration and method of payment permitted by theCommittee at an exercise price determined in accordance withthe terms of the SOPs.
21. Adobe shall have the right to deduct applicabletaxes from any Award payment and withholding, at the timeof delivery of cash or Shares under the Plans, an appropriateamount of cash or Shares or a combination thereof for a paymentof taxes required by law or to take such other action as maybe necessary in the opinion of Adobe or the Committee to satisfyall obligations for the withholding of such taxes.
22. During the lifetime of a Participant,Awards shall be exercisable only by the Participant or theParticipant's guardians or legal representatives. Generally,no Award shall be assignable or transferable by the Participant,except by will or by the laws of intestacy (the recipientof an Award under a will or the laws of intestacy is a "Beneficiary")(Beneficiaries, guardians and legal representatives are, collectively,"Permitted Transferees").
23. Generally, following the termination ofa Participant's relationship with the Adobe Companies forreasons of death, disability, retirement or any other reason,a former Participant ("Former Participant") and,on the death of a Participant, a Permitted Transferee, maycontinue to have rights in respect of the SOPs ("Post-TerminationRights").
24. Post-Termination Rights are only availableif the Awards to which they relate were granted to the Participantwhile the Participant was an Employee or Consultant and nonew Awards will be granted to Former Participants.
25. 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 Plans will beeffected through Nasdaq.
26. The sale ("First Trade") ofShares acquired under the Plan may be made by Participants,Former Participants or Permitted Transferees through the Agent.
27. As of October 1, 2002, residents of Canadadid not own, directly or indirectly, more than 10% of theoutstanding Shares and did not represent in number more than10% of the total number of owners, directly or indirectly,of the Shares.
28. All necessary securities filings havebeen made in the U.S. in order to offer the Plans to Participantsresident in the U.S.
29. A prospectus prepared according to U.S.securities laws describing the terms and conditions of eachof the Plans will be electronically available (or availablein hard copy upon request) to each Participant in the SOPswho is granted an Award and to each Participant who is eligibleto participate in the ESPP. The annual reports, proxy materialsand other materials that Adobe provides to its U.S. stockholderswill be provided or made available upon request to Participantsresident in the Jurisdictions who acquire and retain Sharesunder the Plans at substantially the same time and in substantiallythe same manner as such documents would be provided to U.S.stockholders.
30. An order of the British Columbia SecuritiesCommission dated December 18, 1998 (the "Prior B.C. Order")provided exemptive relief from the Prospectus Requirementand the Registration Requirement required in connection withFirst Trades in Shares acquired under the 1994 Plan and theESPP. The Prior B.C. Order did not provide the relief requestedin this Application with respect to trades involving beneficiariesor First Trades.
31. When the Agents sell Shares on behalfof Participants, Former Participants and Permitted Transferees,the Agents, Participants, Former Participants and PermittedTransferees may not be able to rely upon the exemptions fromthe Registration Requirements and Prospectus Requirementscontained in the Legislation of the Jurisdictions.
32. The exemption contained in section 2.14of Multilateral Instrument 45-102 ("MI 45-102) is notavailable in connection with First Trades because Adobe isa reporting issuer in certain Canadian 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 the Prospectus Requirement and theRegistration Requirement will not apply to first trades by Participants,Former Participants or Permitted Transferees in Shares acquiredpursuant to the Plans, including first trades effected throughthe Agents, provided that the conditions in subsection 2.14(1)of Multilateral Instrument 45-102 - Resale of Securities,other than the requirements of paragraph 2.14(1)(a), are satisfied.
November 15, 2002.
"Paul M. Moore" "HaroldP. Hands"