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Oracle Corporation - MRRS Decision
Headnote
Mutual Reliance Review System for ExemptiveRelief Applications - relief from registration and prospectusrequirements for trades involving employees and former employeespursuant to an employee stock option plan.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S. 5., as am.ss. 25, 53 and 74 (1).
Applicable Ontario Rules
Rule 45-503 - Trades to Employees, Executivesand Consultants (1998), 21 OSCB 117
Multilateral Instrument 45-102 - Resale of Securities(2001), 24 O.S.C.B.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO,
BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA,
NEW BRUNSWICK AND NOVA SCOTIA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ORACLE CORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator ("Decision Maker") ineach of Ontario, British Columbia, Alberta, Saskatchewan, Manitoba,New Brunswick and Nova Scotia ("Jurisdictions")has received an application from Oracle Corporation ("Oracle"or "Company") for a decision pursuant to thesecurities legislation of the Jurisdictions ("Legislation")that:
(i) the requirements contained in the Legislationto be registered to trade in a security (the "RegistrationRequirement") and to file and obtain a receipt fora preliminary prospectus and a prospectus (collectively withthe Registration Requirement, the "Registration andProspectus Requirements") shall not apply to certaintrades in shares of Oracle common stock ("Shares")and Awards, as defined below, made in connection with the Oracle1991 Long-Term Equity Incentive Plan ("1991 LTIP"),the Oracle 2000 Long-Term Equity Incentive Plan ("2000LTIP") and the Employee Stock Purchase Plan (1992)("ESPP") (collectively, "Plans");and
(ii) the requirements contained in the Legislationrelating to the delivery of an offer and issuer bid circularand any notices of change or variation thereto, minimum depositperiods and withdrawal rights, taking up and paying for securitiestendered to an issuer bid, disclosure, restrictions upon purchasesof securities, bid financing, identical consideration and collateralbenefits together with the requirement to file a reporting formwithin 10 days of an exempt issuer bid and pay a related fee("Issuer Bid Requirements") shall not applyto certain acquisitions by Oracle of Shares or Awards pursuantto the Plans in the Jurisdictions.
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications ("System"),the Nova Scotia Securities Commission is the principal regulatorfor this application;
AND WHEREAS Oracle has represented tothe Decision Makers as follows:
1. Oracle is presently a corporation incorporatedunder the laws of the State of Delaware. The executive officesof Oracle are located in Redwood Shores, California.
2. The Company is registered with the Securitiesand Exchange Commission ("SEC") in the U.S.under the U.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.
3. Oracle is not, and has no present intentionof becoming, a reporting issuer in any jurisdiction in Canada.The majority of the directors and senior officers of Oraclereside outside of Canada.
4. The authorized share capital of Oracle consistsof 11,000,000,000 Shares and 1,000,000 shares of preferred stock("Preferred Shares"). As of December 31, 2001,there were 5,497,177,469 Shares and no Preferred Shares issuedand outstanding.
5. The Shares are quoted on the Nasdaq NationalMarket ("Nasdaq").
6. Oracle intends to use the services of oneor more agents or brokers ("Agents") underthe Plans. The current Agents for the Plans are E*TRADE CanadaSecurities, Inc., AST Stock Plan, Inc. and Delphi Asset ManagementCorp. Not all of the current Agents are registered to conductretail trades in the Jurisdictions and, if replaced, or if additionalAgents are appointed, are not all expected to be registeredin the Jurisdictions. Agents that are not registered in theJurisdictions are or will be registered under applicable U.S.securities or banking legislation to trade in securities, ifrequired under such legislation, and are or will be authorizedby Oracle to provide services under the Plans. An Agent thatis not registered in the Jurisdictions but is registered totrade in securities in the U.S. is referred to as a "ForeignAgent".
7. The Agents' role in the Plans may include:(a) assisting with the administration of the Plans, includingrecord-keeping functions; (b) facilitating the exercise of Options(as defined below) granted under the Plans (including cashlessand stock-swap exercises) to the extent that they are exercisablefor Shares; (c) facilitating the issuance of Shares pursuantto the ESPP; (d) facilitating the cancellation and surrenderof Awards (as defined below) as permitted under the Plans; (e)holding Shares issued under the Plans on behalf of Participants(as defined below), Former Participants (as defined below) andPermitted Transferees (as defined below); (f) facilitating theresale of the Shares issued in connection with the Plans; and(g) facilitating the mechanisms as set out in the Plans forthe payment of withholding taxes.
8. The Plans are administered by the board ofdirectors of the Company ("Board") and/or acommittee appointed by the Board ("Committee").
9. All necessary securities filings have beenmade in the U.S. in order to offer the Plans to Participantsof Oracle and its affiliates ("Oracle Companies").The Plans have been approved by the shareholders of Oracle.
10. A prospectus prepared according to U.S.securities laws describing the terms and conditions of the Planswill be delivered to each Canadian Participant who is eligibleto participate in the ESPP or who receives an Award under the2000 LTIP or the 1991 LTIP. The annual reports, proxy materialsand other materials Oracle is required to file with the SECwill 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.
11. The sale of Shares acquired under the Plansmay be made by Participants, Former Participants or PermittedTransferees through the Agents.
12. 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 be effectedthrough Nasdaq.
13. As of August 20, 2001, Canadian shareholdersof Oracle did not own, directly or indirectly, more than 10%of the issued and outstanding Shares and did not represent innumber more than 10% of the shareholders of the Company.
14. The purposes of the 1991 LTIP and the 2000LTIP are to provide an incentive to eligible employees, independentconsultants, advisers, officers and directors of the OracleCompanies whose present and potential contributions are importantto the continued success of the Company; to afford such personsan opportunity to acquire a proprietary interest in the Company;and to enable the Company to continue to enlist and retain inits employ the best available talent for the successful conductof its business. It is Oracle's intention to only allow employeesof the Oracle Companies ("Participants") inCanada to participate in the 1991 LTIP and 2000 LTIP at thistime.
15. The following awards are offered under the1991 LTIP and 2000 LTIP: (a) stock options exercisable for Shares("Options"); (b) stock purchase rights; (c)stock appreciation rights; and (d) long-term performance awards(collectively, the "Awards"). The Awards arenon-transferable. It is Oracle's intention to only offer Optionsto Participants in Canada at this time.
16. The Shares issued under the 1991 LTIP and2000 LTIP are previously authorized but unissued Shares or reacquiredShares, whether purchased on the market or otherwise.
17. Participants who participate in the 1991LTIP and 2000 LTIP will not be induced to purchase Shares byexpectation of employment or continued employment.
18. The maximum number of Shares that may beissued under the 1991 LTIP is 480,950,499 and under the 2000LTIP is 570,893,278 plus any unused Shares under the 1991 LTIPthat may be transferred to the 2000 LTIP. The foregoing maximumamount is subject to adjustment as provided for in the Plans.
19. The Committee may, in its sole discretion,grant Options to eligible Participants. Each Option grantedunder the 1991 LTIP and 2000 LTIP will be evidenced by an Optionagreement ("Option Agreement").
20. As of December 31, 2001, there were 952Participants in Canada eligible to receive Options under the2000 LTIP: 696 Participants in Ontario; 53 Participants in BritishColumbia; 43 Participants in Alberta; 4 Participants in Saskatchewan;10 Participants in Manitoba; 140 Participants in Québec;4 Participants in New Brunswick; and 2 Participants in NovaScotia. No more Awards are being made under the 1991 LTIP.
21. Subject to the provisions of the 1991 LTIP and 2000 LTIP,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.
22. Options shall be exercisable at such timesand subject to such terms and conditions as the Committee mayspecify, provided that no Option shall be exercisable afterthe expiration of ten years from the date of grant.
23. The exercise price for Options ("ExercisePrice") will be specified in the Option Agreement andwill be established at the discretion of the Committee. Generally,the Exercise Price per Share shall be the Fair Market Value(as defined in the 1991 LTIP and 2000 LTIP) of a Share on theeffective date of grant of the Option.
24. The Committee shall establish proceduresgoverning the exercise of Options. Generally, in order to exercisean Option, a Participant, Former Participant or Permitted Transfereemust submit to Oracle or an Agent a notice of exercise in theform and manner prescribed by the Committee ("Noticeof Exercise") identifying the Option and number ofShares being purchased, together with full payment for the Shares.The Notice of Exercise shall specify which type of exercisewill be used to pay the Exercise Price and other costs, if any.
25. Following the termination of a Participant'srelationship with the Oracle Companies for reasons of disability,retirement or any other reason ("Former Participant")or where the Option has been transferred on the death of a Participantby will or pursuant to the laws of intestacy or where the Optionhas been transferred to family members and trusts and charitableinstitutions as the Committee shall approve at the time of thegrant of such Option ("Permitted Transferees"),the Former Participants and Permitted Transferees will continueto have rights in respect of the Plans ("Post-TerminationRights"). Post-Termination Rights may include, amongother things, the right of a Former Participant or PermittedTransferee to exercise an Option for a period determined inaccordance with the Plans and the right to sell Shares acquiredunder the Plans through the Agents. Post-Termination Rightsare only available if the right was earned by the Participantwhile the Participant still had a relationship with the OracleCompanies.
26. The purpose of the ESPP is to provide Participantsan opportunity to purchase Shares through payroll deductions.
27. Subject to adjustments as provided for inthe ESPP, an aggregate of 405,000,000 Shares have been reservedfor issuance under the ESPP.
28. As of December 31, 2001, there were 952 Participants inCanada eligible to purchase Shares under the ESPP: 696 Participantsin Ontario; 53 Participants in British Columbia; 43 Participantsin Alberta; 4 Participants in Saskatchewan; 10 Participantsin Manitoba; 140 Participants in Quebec; 4 Participants in NewBrunswick; and 2 Participants in Nova Scotia.
29. Participants may participate in an offeringby delivering a subscription agreement to the Company withinthe time specified in the ESPP, in the prescribed form, therebyauthorizing regular payroll deductions accumulated in a periodicdeposit account maintained on behalf of the Participant in theESPP.
30. The purchase price of Shares acquired underthe ESPP shall not be less than the lesser of (i) an amountequal to 85% of the fair market value of a Share on the OfferingDate, as defined in the ESPP; or (ii) an amount equal to 85%of the fair market value of a Share on the Exercise Date, asdefined in the ESPP.
31. An ESPP Participant may authorize deductionsnot exceeding 10% of compensation, up to a maximum of US$21,250per year.
32. Immediately upon termination for any reasonof a Participant's employment with the Oracle Companies, theaccumulated payroll deductions shall be distributed to the terminatedemployee, without interest, unless termination occurs within15 days of the end of the Offering Period, as defined in theESPP, in which case the purchase will occur at the end of theOffering Period. A terminated Participant shall immediatelycease to participate in the ESPP.
33. Pursuant to the 1991 LTIP and the 2000 LTIP,the acquisition of Awards and Shares by the Company in certaincircumstances may constitute an "issuer bid". Theterms of the Plans permit Option holders to surrender Sharesto the Company on a stock-swap exercise; for the Company towithhold Shares in order to satisfy tax-withholding obligations(the Shares so withheld will have a Fair Market Value (as definedin the Plans) equal to the amount required to be withheld);for the Company to buy out for a payment in cash or Shares anOption; for the Company to substitute new Options for previouslyissued Options. The exemptions in the Legislation from the IssuerBid Requirements may not be available for such acquisitionsby the Company since such acquisitions may occur at a pricethat is not calculated in accordance with the "market price,"as that term is defined in the Legislation and may be made frompersons other than employees or former employees.
34. The Legislation of the Jurisdictions doesnot contain exemptions from the Registration and ProspectusRequirements for all the trades in Awards and Shares under thePlans.
35. When a Foreign Agent sells Shares on behalfof Participants, Former Participants and Permitted Transferees,the Foreign Agent, Participants, Former Participants and PermittedTransferees may not be able to rely upon the exemptions fromthe Registration Requirement contained in the Legislation.
AND WHEREAS pursuant to the System,this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, "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 Makerspursuant to the Legislation is that:
(i) the Registration and Prospectus Requirementsshall not apply to any trade or distribution of Awards or Sharesmade in connection with the Plans, including trades and distributionsinvolving the Oracle Companies, the Agents, Participants, FormerParticipants, and Permitted Transferees, provided that the firsttrade of Shares acquired through the Plans pursuant to thisDecision shall be deemed a distribution or primary distributionto the public under the Legislation unless the conditions insubsection 2.14(1) of Multilateral Instrument 45-102 Resaleof Securities are satisfied;
(ii) the first trade of Shares acquired pursuantto the Plans by Participants, Former Participants and PermittedTransferees effected through a Foreign Agent shall not be subjectto the Registration Requirement provided that the first tradeis executed through a stock exchange or market outside of Canada;and
(iii) the Issuer Bid Requirements shall notapply to the acquisition by Oracle of Shares or Awards fromParticipants, Former Participants and Permitted Transfereesprovided the acquisitions are made in accordance with the termsof the Plans.
March 27, 2002.
"H. Leslie O'Brien"