Openwave Systems, Inc. - MRRS Decision
Headnote
Mutual Reliance Review System for ExemptiveRelief Applications B Relief from registration and prospectusrequirements and from issuer bid requirements for trades madein accordance with incentive compensation plans and an employeeshare purchase plan, subject to certain conditions.
Ontario Statutes
Securities Act, R.S.O. 1990, c.S.5, as am.,ss.25, 53,74(1), 95, 96, 97, 98, 100 and 104( 2) (c).
Ontario Regulations
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., s.203.1.
Multilateral Instruments
Multilateral Instrument 45-102 Resale of Securities.
Ontario Rules
Rule 45-503 Trades to Employees, Executivesand Consultants.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, BRITISH COLUMBIAAND ALBERTA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
OPENWAVE SYSTEMS, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia and Alberta (the "Jurisdictions")has received an application from Openwave Systems, Inc. ("Openwave"or the "Company") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that (i) the requirement contained in the Legislation to beregistered to trade in a security (the "Registration Requirements"),and the requirement to file a prospectus and obtain a receipt(the "Prospectus Requirements") will not apply tocertain trades in securities of Openwave made in connectionwith the 1999 Employee Stock Purchase Plan (the "ESPP");the Openwave 1995 Stock Plan (the "1995 SOP"); theOpenwave 1996 Stock Plan (the "1996 SOP"); and theOpenwave 2001 Stock Compensation Plan (the "2001 SOP")(the 1995 SOP, the 1996 SOP and the 2001 SOP are collectivelythe "SOPs" and together with the ESPP, the "Plans");(ii) the Registration Requirements will not apply to first tradesof shares acquired under the Plans executed on an exchange ormarket outside of Canada; and (iii) the requirements containedin the Legislation relating to the delivery of an offer andissuer bid circular and any notices of change or variation thereto,minimum deposit periods and withdrawal rights, taking up andpaying for securities tendered to an issuer bid, disclosure,restrictions upon purchases of securities, bid financing, identicalconsideration and collateral benefits together with the requirementto file a reporting form within 10 days of an exempt issuerbid and pay a related fee (the "Issuer Bid Requirements")will not apply to certain acquisitions by the Company of sharespursuant to 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 Openwave has representedto the Decision Makers as follows:
1. Openwave is presently a corporation ingood standing incorporated under the laws of the State ofDelaware.
2. Openwave and affiliates of Openwave ("OpenwaveAffiliates") (Openwave and Openwave Affiliates are collectively,the "Openwave Companies") provide software and servicesrelated to mobile Internet and network use.
3. The Company is registered with the SecuritiesExchange Commission (the "SEC") in the U.S. underthe U.S. Securities Exchange Act of 1934 (the "ExchangeAct") and is not exempt from the reporting requirementsof the Exchange Act pursuant to Rule 12g 3-2.
4. Openwave is not a reporting issuer in anyof the Jurisdictions and has no present intention of becominga reporting issuer in any of the Jurisdictions.
5. The authorized share capital of Openwaveconsists of: 1,000,000,000 shares of common stock ("Shares");and 5,000,000 shares of preferred stock ("Preferred Shares").As of January 31, 2002, there were 174,483,287 Shares, and0 Preferred Shares issued and outstanding.
6. The Shares are quoted on Nasdaq.
7. Openwave intends to use the services ofone or more agents/brokers in connection with the Plans (eachan "Agent"). E*Trade Securities Inc. ("E*Trade")and E*Trade Canada Securities Corporation ("E*Trade Canada")have initially been appointed by Openwave to act as Agentsfor the Plans. E*Trade is a corporation registered under applicableU.S. securities or banking legislation to conduct retail tradesin securities and E*Trade Canada is registered as a broker/dealerin each of the Jurisdictions. Openwave may at any time appointadditional or replacement Agents under the Plans. Any Agentappointed in replacement of, or in addition to, E*Trade andE*Trade Canada, if not a registrant in the Jurisdictions,would be registered under applicable U.S. legislation.
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 and stock swap exercises) under the Plans;(e) facilitating the payment of withholding taxes, if any,by cash or the tendering or withholding of Shares; (f) facilitatingthe reacquisition of Awards (as defined below) under the termsof the Plans; and (g) facilitating the resale of Shares issuedin connection with the Plans.
9. The purposes of the SOPs are to attractand retain the best available personnel, to provide additionalincentive to Participants and to promote the success of Openwave'sbusiness. The purpose of the ESPP is to provide Participantswith an opportunity to purchase Shares of the Company.
10. Subject to adjustment as described inthe Plans, the maximum number of Shares that may be issuedpursuant to the Plans are: 6,552,339 Shares under the ESPP;30,855,627 Shares under the 1995 SOP; 25,593,850 Shares underthe 1996 SOP and 10,604,385 Shares under the 2001 SOP.
11. The SOPs permit grants of: (a) optionson Shares ("Options"); (b) stock awards includingrestricted stock bonus awards ("Restricted Stock BonusAwards"); (c) the right to acquire restricted stock ("RestrictedStock Purchase Awards"), and (d) the right to purchaseShares ("Stock Purchase Rights") (Shares, Options,Restricted Stock Bonus Awards, Restricted Stock Purchase Awardsand Stock Purchase Rights are, collectively, "Awards")to employees, non-employee directors and consultants of theOpenwave Companies ("SOP Participants").
12. Under the ESPP, employees of the OpenwaveCompanies ("ESPP Participants") are offered an opportunityto purchase Shares by means of applying accumulated payrolldeductions to the purchase of Shares at a discount price determinedin accordance with the terms of the ESPP.
13. Employees of the Openwave Companies eligibleto participate in the Plans will not be induced to purchaseShares or to exercise Awards by expectation of employmentor continued employment.
14. Consultants to the Openwave Companieseligible to participate in the Plans will not be induced topurchase Shares or to exercise Awards by expectation of theindividual consultant, the consultant's company or the consultant'spartnership being engaged or continuing to be engaged as aconsultant.
15. Officers of the Openwave Companies whoparticipate in the Plans will not be induced to purchase Sharesor to exercise Awards by expectation of appointment or employmentor continued appointment or employment as an officer.
16. It is anticipated that consultants whowill be granted Awards under the SOPs will: (a) provide technical,business, management or other services to the Openwave Companies(other than services relating to the sale of securities orpromotional/investor relations services); (b) provide consultingservices to the Openwave Companies under a written contract;(c) have a relationship with the Openwave Companies that willpermit them to be knowledgeable about the business affairsof the Openwave Companies; and (d) will spend a significantamount of time and attention on the affairs and business ofone or more of the Openwave Companies.
17. As of April 17, 2002, there were 19 personsresident in Canada eligible to receive Awards under or participatein the Plans: 11 persons resident in Ontario; 4 persons residentin British Columbia; 1 person resident in Alberta, and 3 personsresident in Quebec.
18. All necessary securities filings havebeen made in the U.S. in order to offer the Plans to Participantsresident in the U.S.
19. A prospectus prepared according to U.S.securities laws describing the terms and conditions of eachof the Plans will be delivered to each SOP Participant whoreceives an Award under the SOPs and to each ESPP Participantwho is eligible to participate in the ESPP. The annual reports,proxy materials and other materials Openwave provides to itsU.S. shareholders will be provided or made available uponrequest to SOP Participants and ESPP Participants (together"Participants") resident in the Jurisdictions atsubstantially the same time and in substantially the samemanner as such documents are provided to Participants whoseparticipation under the Plans is comparable to that of theCanadian residents.
20. The Plans are administered by a committeeappointed by the board of directors of Openwave (the "Committee").
21. Generally, in order to exercise an Optionunder the SOPs, an optionee must submit a written notice ofexercise to Openwave or to the Agent identifying the Option,the number of Shares being purchased and the method of payment.
22. The SOPs provide that on exercise of Options,the payment of the exercise price in order to acquire theunderlying Shares may be made: (a) in cash; (b) by the surrenderof Shares owned by the Option holder to the Company for cancellation("Stock-Swap Exercises") or to the Agentfor resale; (c) the retention of a number of Shares by theCompany from the total number of Shares into which the Optionis exercised; (d) by a combination of the foregoing; or (e)such other consideration and method of payment permitted bythe Committee at an exercise price determined in accordancewith the terms of the SOPs.
23. Options will vest and will be exercisableas specified in the Option agreement as determined by theCommittee. The Option exercise price for each Share purchasedunder any Option will be specified in the Option agreementand (a) in the case of the 2001 SOP, will not be less thanthe fair market value (as such term is defined in the 2001SOP), (b) in the case of the 1995 SOP and the 1996 SOP, theexercise price shall be determined by the Committee in itsdiscretion.
24. The term of each Option will be fixedby the Committee, provided however that the term shall beno more than ten (10) years from the date of the grant. Thedate of exercise will be chosen by the Option holder.
25. Under the SOPs, on the termination ofthe SOP Participant's service with Openwave, Shares awardedunder Restricted Stock Bonus Awards or Restricted Stock PurchaseAwards may be subject to a Share reacquisition or Share repurchaseoption in favor of Openwave in accordance with the terms ofthe Plans ("Share Reacquisitions").
26. Openwave shall have the right to deductapplicable taxes from any payment under the Plans by withholding,at the time of delivery or vesting of cash or Shares underthe Plans, an appropriate amount of cash or Shares ("ShareWithholding Exercises") or a combination thereof fora payment of taxes required by law or to take such other actionas may be necessary in the opinion of Openwave or the Committeeto satisfy all obligations for the withholding of such taxes.
27. Awards and rights under the Plans arenot transferable by a Participant other than by will or beneficiarydesignation or by the laws of intestacy unless otherwise providedfor by the Committee.
28. Following the termination of a Participant'srelationship with the Openwave Companies for reasons of disability,retirement, termination, change of control or any other reason("Former Participants"), and on the death of a Participantwhere Awards have been transferred by will or pursuant toa beneficiary designation or the laws of intestacy or otherwise("Permitted Transferees"), the Former Participantsand Permitted Transferees will continue to have rights inrespect of the Plans ("Post-Termination Rights").
29. Post-Termination Rights may include, amongother things: (a) the right to exercise Awards for a perioddetermined in accordance with the SOPs; (b) the right to receiveShares under the ESPP; (c) the right to receive payment ofaccumulated payroll deductions in his or her account, withoutinterest under the ESPP; and (d) the right to sell Sharesacquired under the Plans through the Agent.
30. Post-Termination Rights will only be effectivewhere such rights accrued while the Participant had a relationshipwith the Openwave Companies.
31. 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.
32. As of April 25, 2002, Canadian shareholdersdid not own, directly or indirectly, more than 10% of theissued and outstanding Shares and did not represent in numbermore than 10% of the shareholders of Openwave. If at any timeduring the currency of the Plans Canadian shareholders ofOpenwave hold, in aggregate, greater than 10% of the totalnumber of issued and outstanding Shares or if such shareholdersconstitute more than 10% of all shareholders of Openwave,Openwave will apply to the relevant Jurisdiction for an orderwith respect to further trades to and by Participants in thatJurisdiction in respect of the Shares acquired under the Plans.
33. Pursuant to the SOPs, the acquisitionof Awards by the Company in the following circumstances mayconstitute an "issuer bid": Stock Swap Exercises,Share Withholding Exercises, Share Reacquisitions.
34. 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.
35. The Legislation of all of the Jurisdictionsdoes not contain exemptions from the Prospectus Requirementsand Registration Requirements for all the intended tradesin Awards under the Plans.
36. 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 contained in the Legislation.
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 Requirements and ProspectusRequirements will not apply to any trade or distributionof Awards or Shares made after the date of this Decisionin connection with the Plans provided that the first tradein Shares acquired through the Plans pursuant to this Decisionis deemed a distribution under the Legislation unless theconditions in subsection 2.14(1) of Multilateral Instrument45-102 Resale of Securities are satisfied;
(b) the first trade after the date of thisDecision of Awards or Shares acquired under the Plans willnot be subject to the Registration Requirements providedthe conditions in subsection 2.14(1) of Multilateral Instrument45-102 Resale of Securities are satisfied; and
(c) the Issuer Bid Requirements will notapply to the acquisition after the date of this Decisionby Openwave of Awards or Shares from Participants, FormerParticipants or Permitted Transferees provided such acquisitionsare made in accordance with the terms of the Plans.
August 6, 2002.
"Howard I. Weston" "RobertL. Shirriff"