Securities Law & Instruments



IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA, ONTARIO, NEW BRUNSWICK, PRINCE EDWARD ISLAND, NOVA SCOTIA, NEWFOUNDLAND,THE NORTHWEST TERRITORIES, NUNAVUT AND THE YUKON TERRITORY

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
XEROX CANADA INC. AND XEROX CORPORATION

MRRS DECISIONS DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, theNorthwest Territories, Nunavut and the Yukon Territory (collectively, the "Jurisdictions",and, each, a "Jurisdiction") has received an application from Xerox Canada Inc. ("XeroxCanada") and Xerox Corporation ("Xerox") for the following decisions pursuant to thesecurities legislation (the "Legislation") of the Jurisdictions:

(a) a decision that, under the Legislation, the registration requirement and theprospectus requirement as each of these terms is defined in National Instrument14-101 (the "Registration and Prospectus Requirements") shall not apply to;

(i) the grant by Xerox to Xerox Canada of a right (the "Subscription Right") toacquire, from time to time, from Xerox, shares ("Xerox Common Shares")of common stock of Xerox, in connection with the exercise of Rights(defined below) to purchase or obtain Xerox Common Shares that, fromtime to time, have been, or will have been, issued by Xerox Canada underthe Xerox Canada Executive Rights Plan ("the Plan") to persons that are,or were, at the time of the issue, employees ("Employees") of XeroxCanada or an affiliate of Xerox Canada; and

(ii) the distribution of Xerox Common Shares to the holder of a Right, uponexercise, by Xerox Canada, or by a person or company (a "PlanAdministrator") as the agent or trustee appointed by Xerox Canada toadminister the Plan, subject to certain terms and conditions; and

(b) a decision that previous decisions (the "Previous Decisions") of the DecisionMakers referred to in the attached Schedule "A", which concern the samesubject matter as this Decision, but were issued before certain amendmentswere made to the Plan to provide for Performance Rights and Bonus Rights (asdefined below), be revoked.

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the PrincipalRegulator for this application;

AND WHEREAS it has been represented by Xerox Canada and Xerox to theDecision Makers that:

1. Xerox Canada, a corporation amalgamated under the laws of Ontario, is areporting issuer, or the equivalent, under the Legislation of each Jurisdiction,and is not in default of any requirement of the Legislation;

2. the head office of Xerox Canada is in Ontario;

3. Xerox, a corporation incorporated under the laws of the State of New York,United States of America, is a reporting issuer or the equivalent under theLegislation of each Jurisdiction, and is not in default of any requirement of theLegislation;

4. the authorized and issued capital of Xerox Canada comprises class A shares("Xerox Canada Class A Shares"), non-voting exchangeable class B shares("Xerox Canada Class B Shares") and non-cumulative, non-voting, redeemablepreferred shares ("Xerox Canada Preference Shares");

5. Xerox owns all of the Xerox Canada Class A Shares and the Xerox CanadaPreference Shares that are issued and outstanding;

6. the issued capital of Xerox consists of shares of common stock ("Xerox CommonShares") and cumulative preferred shares that are issuable in series;

7. the Xerox Common Shares are listed and posted for trading on the New YorkStock Exchange (the "NYSE") and several other stock exchanges outside ofCanada;

8. the terms of the Xerox Canada Class B Shares entitle the holder, at any time, toexchange, with Xerox Canada, one Xerox Canada Class B Share for two XeroxCommon Shares;

9. under the Plan, rights ("Purchase Rights") to acquire Xerox Common Sharesfrom Xerox Canada have been issued, and may, from time to time, be issued byXerox Canada to certain Employees;

10. the Performance Rights and Bonus Rights (as hereafter defined) are nottradeable and, except upon the death of the holder, are not transferable, andeach Purchase Right entitles the holder, upon exercise, to acquire one XeroxCommon Share from Xerox Canada;

11. the Purchase Rights are exercisable for a set period of time, at a price based onthe closing price of one Xerox Common Share on the NYSE on the date thePurchase Right is issued;

12. upon the exercise of a Purchase Right by the holder, Xerox Canada will transferto the holder one Xerox Common Share, which Xerox Canada, on behalf of theexercising holder, has either purchased from Xerox under the Subscription Rightor purchased on the open market;

13. all Xerox Common Shares purchased, or to be purchased, by Xerox Canadafrom Xerox under the Subscription Right have been and will be issued fromtreasury stock;

14. in 1999, Xerox Canada amended the Plan to vary certain terms applicable to thesubsequent issue of Purchase Rights and to provide for the issue to certainEmployees of the following:

(i) rights ("Performance Rights") to acquire Xerox Common Shares fromXerox Canada, with the number of Xerox Common Shares to be acquiredupon exercise of a Performance Right determined by formula based uponcertain year-over-year growth in earnings, per Xerox Common Share, ofXerox; and

(ii) rights (a "Bonus Right"), to acquire Xerox Common Shares from XeroxCanada, the number of which to be granted, and the vesting requirementsof which, will depend upon the annual bonus of the Employee, asdetermined under individual and corporate-based performance criteriaestablished for the Employee (the "Bonus Stock Rights"), provided theEmployee has accepted in writing, before the expiry of a period duringwhich such offer has been left open for acceptance, the offer to receiveBonus Stock Rights;

(the Purchase Rights, Performance Rights and Bonus Rights being collectivelyreferred to as "Rights");

15. the exercise price of a Performance Right is nil;

16. the exercise price, payable in cash, of a Bonus Stock Right that is accepted byan Employee will be determined on the day following the expiry of the period oftime for acceptance and will based upon 100 per cent of the average of the highand low price of a Xerox Common Share on the NYSE on such date;

17. Xerox Common Shares deliverable by Xerox Canada upon the exercise of aPerformance Right or Bonus Right are to be obtained by Xerox Canada pursuantto the Subscription Right or in the open market;

18. the Performance Rights and Bonus Rights are not tradeable and, except uponthe death of the holder; are not transferable;

19. Employees are under no obligation to accept or exercise Rights and noEmployee will be induced to accept or exercise Rights by expectation ofemployment or continued employment;

20. the holders of Rights are provided with all the continuous disclosure materialrelating to Xerox which is provided by Xerox to holders of Xerox CommonShares that are resident in Canada;

21. the distribution by Xerox Canada of Rights to Employees pursuant to the Planwill be made in reliance upon registration and prospectus exemptions (the"Employee Exemptions") applicable to the issuance of securities to employeescontained in the Legislation;

22. except for exemptions provided for in the Previous Decisions, there are noprospectus or registration exemptions available under the Legislation in respectof the grant by Xerox to Xerox Canada of the Subscription Right;

23. the distribution by Xerox of Xerox Common Shares to Xerox Canada, from timeto time, pursuant to the exercise of the Subscription Right, is exempt from theRegistration and Prospectus Requirements by virtue of exemptions (the "RightsExemptions") that are available under the Legislation for the issue of securitiesupon the exercise of a right previously granted by the issuer of the right;

24. Xerox Canada cannot rely on the Rights Exemptions or the EmployeeExemptions to transfer Xerox Common Shares, purchased from Xerox under theSubscription Right or purchased on the open market, to holders of Rights, upontheir exercise, because, in the case of the Rights Exemptions, the XeroxCommon Shares are not securities of Xerox Canada, and, because, in the caseof the Employee Exemptions, the holder may not, at the time of exercise, be anemployee referred to in the Employee Exemptions; and

25. Xerox Canada wishes to report its trades in Xerox Common Shares to the holderof a Right, upon exercise, on a monthly basis;

AND WHEREAS pursuant to the System this MRRS Document evidences thedecisions of each Decision Maker (collectively, the "Decisions");

AND WHEREAS each of the Decision Makers is satisfied that the testscontained in the Legislation that provides the Decision Maker with the jurisdiction tomake the Decisions has been met;

THE DECISION of the Decision Makers, pursuant to the Legislation, is that theRegistration and Prospectus Requirements shall not apply to;

(a) the grant by Xerox to Xerox Canada of the Subscription Right, provided that thefirst trade in any Xerox Common Shares acquired upon exercise of theSubscription Right shall be a distribution; or

(b) the distribution (a "Xerox Canada Distribution") of Xerox Common Shares to theholder of any Right, upon exercise of the Right, made by Xerox Canada or aPlan Administrator, on behalf of Xerox Canada, provided that, in each case, thefirst trade in any Xerox Common Shares acquired by the holder, upon theexercise of the Right and pursuant to this Decision in a Jurisdiction (the"Applicable Jurisdiction"), shall be a distribution under the Legislation (the"Applicable Legislation") of such Jurisdiction unless:

(i) at the time of the first trade, Xerox is a reporting issuer, or the equivalent,under the Applicable Legislation and has been a reporting issuer, or theequivalent, under the Applicable Legislation for at least twelve months;

(ii) disclosure of the prior corresponding Xerox Canada Distribution is madeto the Decision Maker under the Applicable Legislation;

 

(iii) if, in respect of the first trade, the seller is in a "special relationship" withXerox, as that term is defined in the Applicable Legislation, the seller hasreasonable grounds to believe that Xerox is not in default of anyrequirement under the Applicable Legislation;

(iv) the first trade is not a trade from the holdings of any person or companyholding a sufficient number of securities to affect materially the control ofXerox, but any holding of any person, company or combination of personsor companies holding more than 20 per cent of the outstanding votingsecurities of Xerox, or more than 20 per cent of the voting securities ofXerox, after giving effect to the exchange of all Xerox Canada Class Bshares held by the person, company or combination of persons andcompanies, shall, in the absence of evidence to the contrary, be deemed,for these purposes, to affect materially the control of Xerox under theApplicable Legislation; and

(v) no unusual effort is made to prepare the market or to create a demand forthe Xerox Common Shares forming the subject matter of the first tradesand no extraordinary commission or consideration is paid in respect of thefirst trade;

PROVIDED THAT, for the purposes of clause (b) (ii), above, disclosure may bemade as

follows:

1. the disclosure is made by way of a letter, filed by Xerox Canada with theDecision Maker, that discloses the date of the Xerox Canada Distribution, thenumber of Xerox Common Shares comprising the Xerox Canada Distribution andthe purchase price paid, or to be paid, for the Xerox Common Shares, which iscertified by an officer of Xerox Canada, on behalf of Xerox Canada, who alsocertifies that he/she has knowledge of the facts set out in the letter; and

2. the disclosure is filed with 10 days of the end of the month in which the XeroxCanada Distribution occurred;

AND IT IS THE FURTHER DECISION of the Decision Makers that the PreviousDecisions are revoked.

February 25th, 2000.

"J. A. Geller"     "Stephen N. Adams"


Schedule "A"

 

List of Previous Decisions

 

Decision Makers Title Date
Order of BritishColumbia SecuritiesCommission In the Matter of the Securities Act S.B.C. 1985, c.83 andIn the Matter of Xerox Canada Inc. and In the Matter ofXerox Corporation January 18,1996
Ruling Order of AlbertaSecurities Commission In the Matter of The Securities Act (S.A. 1981, c.S-6.1,as amended) and In the Matter of Xerox Canada Inc.and Xerox Corporation. December 18,1995
Order of ManitobaSecurities Commission Xerox Canada Inc. and Xerox Corporation December 18,1995
Ruling Order ofOntario SecuritiesCommission In the Matter of the Securities Act, R.S.O. 1990, ChapterS.5, as amended and In the Matter of Xerox Canada Inc.and In the Matter of Xerox Corporation December 22,1995
Ruling of Nova ScotiaSecurities Commission In the Matter of the Securities Act, R.S.N.S. 1989,Chapter 418, as amended and In the Matter of XeroxCanada Inc. and In the Matter of Xerox Corporation December 11,1995
Order of NewBrunswick SecuritiesAdministrator In the Matter of the Security Frauds Prevention Act,R.S.N.B. 1973, Chapter S-6 and In the Matter of XeroxCanada Inc. and In the Matter of Xerox Corporation December 13,1995
Ruling ofNewfoundland Directorof Securities In the Matter of the Securities Act R.S.N. 1990 c. S-13,as amended and In the Matter of Xerox Canada Inc. andIn the Matter of Xerox Corporation December 19,1995
Ruling of PrinceEdward IslandRegistrar of Securities In the Matter of the Securities Act, R.S.P.E.I. 1988,CAP. S-3, as amended and In the Matter of XeroxCanada Inc. and In the Matter of Xerox Corporation December 4,1995
Ruling order of theYukon Registrar ofSecurities In the Matter of the Securities Act R.S.Y. 1986, Chapter158, as amended and In the Matter of Xerox CanadaInc. and In the Matter of Xerox Corporation November 30,1995
Order of the NorthwestTerritories Registrar ofSecurities In the Matter of the Securities Act, R.S.N.W.T. 1988,c.S.5 as amended and in the Matter of Xerox CanadaInc. and Xerox Corporation 35088