Securities Law & Instruments

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, ALBERTA,SASKATCHEWAN, MANITOBA,

ONTARIO, NEW BRUNSWICK ANDNOVA SCOTIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SOLECTRON CORPORATION

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,New Brunswick and Nova Scotia (the "Jurisdictions")has received an application from Solectron Corporation ("Solectron")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that:

(i) the requirement contained in the Legislationto be registered to trade in a security (the "RegistrationRequirement") and the requirement to file a prospectusand obtain a receipt therefor (the "Prospectus Requirement")(the Registration Requirement and the Prospectus Requirementare, collectively, the "Registration and ProspectusRequirements") will not apply to certain trades insecurities of Solectron made in connection with Solectron's2002 Stock Plan (the "SOP") and Employee StockPurchase Plan for Non-U.S. Employees (the "ESPP")(the SOP and the ESPP are, collectively, the "Plans");

(ii) the Registration and Prospectus Requirementswill not apply to first trades of Shares (as defined below)acquired under the Plans provided that the conditions insubsection 2.14(1) of Multilateral Instrument 45-102 - Resaleof Securities, other than the requirements of paragraph2.14(1)(a), are satisfied; and

(iii) the requirements contained in theLegislation relating to the delivery of an offer and issuerbid circular and any notices of change or variation thereto,minimum deposit periods and withdrawal rights, take-up andpayment for securities tendered to an issuer bid, disclosure,restrictions upon purchases of securities, financing, identicalconsideration, collateral benefits, together with the requirementto file a reporting form within ten (10) days of an exemptissuer bid and pay a related fee (the "Issuer Bid Requirements")will not apply to certain acquisitions by Solectron 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, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 - Definitions, or in Québec, CommissionNotice 14-101;

AND WHEREAS Solectron has representedto the Decision Makers as follows:

1. Solectron is a corporation in good standingincorporated under the laws of the State of Delaware;

2. Solectron and affiliates of Solectron (the"Solectron Affiliates") (Solectron and the SolectronAffiliates are, collectively, the "Solectron Companies")are providers of electronics manufacturing and supply-chainmanagement services;

3. Solectron is registered with the SEC inthe U.S. under the U.S. Securities Exchange Act of 1934 (the"Exchange Act") and is not exempt from the reportingrequirements of the Exchange Act;

4. Solectron, C-MAC Industries Inc. ("C-MAC")and 3924548 Canada Inc. entered into a combination agreementdated August 8, 2001, as amended on September 7, 2001, amongSolectron, 3942163 Canada Inc., 3924548 Canada Inc. and C-MACproviding for the combination of Solectron and C-MAC to beeffected by way of an arrangement under section 192 of theCanada Business Corporations Act (the "C-MAC Transaction").The completion of the C-MAC Transaction was announced on December3, 2001;

5. As a result of the C-MAC Transaction, Solectronbecame a reporting issuer in British Columbia, Saskatchewanand Quebec on December 3, 2001 and has remained a reportingissuer in British Columbia, Saskatchewan and Quebec sincethat date. Solectron is not a reporting issuer in any of theother Jurisdictions and has no present intention of becominga reporting issuer in any of the other Jurisdictions;

6. The authorized share capital of Solectronconsists of 1,600,000,000 shares of common stock ("Shares"),and 1,200,000 shares of preferred stock ("Preferred Shares").As of July 16, 2002, there were 823,868,744 Shares and 1 PreferredShare issued and outstanding;

7. The Shares are listed for trading on theNew York Stock Exchange (the "NYSE") under the tickersymbol 'SLR';

8. Under the SOP, options on Shares ("Options")(Shares and Options are, collectively, "Awards")may be issued to employees ("Employees"), non-employeedirectors ("Directors") and consultants ("Consultants")(Employees, Directors and Consultants are, collectively, "Participants")of the Solectron Companies;

9. Under the ESPP, Employees are offered anopportunity to purchase Shares by means of applying accumulatedpayroll deductions at a discounted price determined in accordancewith the terms of the ESPP;

10. The purpose of the SOP is to attract andretain the best available personnel for positions of substantialresponsibility, to provide additional incentive to serviceproviders, and to promote the success of Solectron's business;

11. The purpose of the ESPP is to provideEmployees of the Solectron Companies outside the United Stateswith an opportunity to purchase Shares through accumulatedpayroll deductions;

12. Solectron uses the services of agents/brokers(the "Agent(s)") in connection with the operationof the Plans. Salomon Smith Barney Inc. ("SSB")has been appointed as an Agent under the Plans. SSB is notregistered to conduct retail trades in securities in any ofthe Jurisdictions. SSB is registered to conduct retail tradesunder applicable U.S. securities or banking legislation. Anyother Agent appointed in addition to, or in replacement of,SSB will be registered to conduct retail trades in the Jurisdictionsor a corporation registered to conduct retail trades underapplicable U.S. securities or banking legislation and willbe authorized by Solectron to provide services as an Agentunder the Plans;

13. The role of the Agent may include (a)disseminating information and materials to Participants inconnection with the Plans; (b) assisting with the administrationof and general record keeping for the Plans; (c) holding Shareson behalf of Participants, Former Participants (as definedbelow) and Permitted Transferees (as defined below) in limitedpurpose brokerage accounts; (d) facilitating Option exercises(including cashless exercises or Stock Swap Exercises (asdefined below)) under the Plans; (e) facilitating the paymentof withholding taxes, if any, by cash or the tendering orwithholding of Shares; (f) facilitating the reacquisitionof Awards under the terms of the Plans; and (g) facilitatingthe resale of Shares issued in connection with the Plans;

14. Subject to adjustments as provided forin the ESPP and an increase made in accordance with U.S. law,the maximum number of Shares which shall be made availablefor sale under the ESPP is 19,200,000 Shares, less the numberof Shares issued under Solectron's Employee Stock PurchasePlan for U.S. Employees;

15. Subject to adjustments as provided forin the SOP, and an increase made in accordance with U.S. law,the maximum number of Shares which shall be made availablefor sale under the SOP is 35,000,000 Shares plus (a) any Shareswhich have been reserved but not issued under the Solectron's1992 Stock Option Plan (the "1992 Plan") as of thedate of shareholder approval of the SOP and (b) any Sharesreturned to the 1992 Plan as a result of termination of Optionsor repurchase of Shares issued under the 1992 Plan;

16. All necessary securities filings havebeen made in the U.S. in order to offer the Plans to Participantsresident in the U.S;

17. As of May 31, 2002, there were 586 personsin Canada eligible to be granted Options under the SOP: 16persons resident in British Colombia, 101 persons residentin Alberta, 373 persons resident in Ontario, 24 persons residentin Manitoba, 1 person resident in Saskatchewan, 10 personsresident in Nova Scotia and 61 persons resident in Quebec.There were 5333 persons in Canada eligible to participatein the ESPP: 1011 persons resident in British Columbia, 347persons resident in Alberta, 2904 persons resident in Ontario,160 persons resident in Manitoba, 1 person resident in Saskatchewan,871 persons resident in Nova Scotia, 1 person resident inNew Brunswick and 61 persons resident in Quebec;

18. Employees who participate in the Planswill not be induced to purchase Shares or to exercise Optionsby expectation of employment or continued employment;

19. Officers of the Solectron Companies whoparticipate in the Plans will not be induced to purchase Sharesor to exercise Options by expectation of appointment or employmentor continued appointment or employment as an officer;

20. Consultants who participate in the SOPwill not be induced to purchase shares or to exercise Optionsby expectation of the individual Consultant, the Consultant'scompany or the Consultant's partnership being engaged or continuingto be engaged as a Consultant;

21. The Plans are administered by a committee(the "Committee") appointed by the board of directorsof Solectron (the "Board");

22. It is anticipated that Consultants (asused herein, "consultant" includes a "consultantcompany" as defined in the OSC Rule 45-503 - Tradesto Employees, Executives and Consultants) who will begranted Options under the SOP, to the extent permitted, will:(a) provide on a bona fide basis technical, business,management or other services to the Solectron Companies (otherthan services relating to the sale of securities or promotional/investorrelations services); (b) provide consulting services to theSolectron Companies under a written contract; (c) have a relationshipwith the Solectron Companies that will permit them to be knowledgeableabout the business affairs of the Solectron Companies; and(d) will spend a significant amount of time and attentionon the affairs and business of one or more of the SolectronCompanies;

23. Share purchase rights issued under theESPP are not transferable;

24. Unless determined otherwise by the Committeean Option granted under the SOP may not be sold, pledged,assigned, hypothecated, transferred, or disposed of in anymanner other than by will or by the laws of intestacy andmay be exercised, during the lifetime of the optionee, onlyby the optionee. If the Committee makes an Option transferable,such Option shall contain such additional terms and conditionsas the Committee deems appropriate;

25. Following the termination of a Participant'srelationship with the Solectron Companies for reasons of disability,retirement, termination, change of control or any other reason(such Participants are "Former Participants"), andwhere Awards have been transferred by will or pursuant toa beneficiary designation or the laws of intestacy or otherwiseon the death of a Participant (beneficiaries of such Awardsare "Permitted Transferees"), the Former Participantsand Permitted Transferees will continue to have rights inrespect of the Plans ("Post-Termination Rights");

26. Post-Termination Rights may include, amongother things, (a) the right to exercise Options for a perioddetermined in accordance with the SOP; (b) the right to receivepayment of accumulated payroll deductions in his or her account,without interest under the ESPP; and (c) the right to sellShares acquired under the Plans through the Agent;

27. Post-Termination Rights will only be availableif the Awards or rights to which they relate were grantedto the Participant while the Participant was a Participantand no new Awards or rights will be granted to Former Participantsunder the Plans;

28. Among other payment methods, the SOP providesthat payment for Shares acquired pursuant to the SOP may bemade: (a) in cash; (b) by the surrender of Shares owned bythe Participant to the Solectron for cancellation ("Stock-SwapExercises") or to the Agent for resale; (c) by the retentionof a number of Shares by Solectron from the total number ofShares into which the Option is exercised; or (d) by a combinationof the foregoing;

29. Options may be forfeited by SOP Participantsto the extent such Options are not exercised within the timeperiod prescribed under the SOP or where the Participant'srelationship with Solectron is terminated or where Optionsare cancelled on a merger or sale of assets or on the dissolutionor liquidation of Solectron ("Option Cancellations");

30. Solectron 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") (collectively, Share WithholdingExercises, Stock Swap Exercises and Option Cancellations are"Award Acquisitions") or a combination thereof fora payment of taxes required by law or to take such other actionas may be necessary in the opinion of Solectron or the Committeeto satisfy all obligations for the withholding of such taxes;

31. The annual reports, proxy materials andother materials Solectron is required to file with the SECwill be provided to Participants resident in Canada at thesame time and in the same manner as the documents are providedor made available to U.S. Participants;

32. Shareholders resident in Canada do notown, directly or indirectly, more than 10% of the issued andoutstanding Shares and do not represent in number more than10% of the shareholders of Solectron.

33. If at any time during the currency ofthe Plans shareholders resident in Canada hold, in aggregate,greater than 10% of the total number of issued and outstandingShares or if such shareholders constitute more than 10% ofall shareholders of Solectron, Solectron will apply to therelevant Jurisdiction for an order with respect to furthertrades to and by Participants, Former Participants and PermittedTransferees in that Jurisdiction in respect of Shares acquiredunder the Plans;

34. Participants, Former Participants or PermittedTransferees may exercise Options and sell Shares acquiredunder the Plans through an Agent;

35. Because there is no market for the Sharesin Canada and none is expected to develop, any resale of theShares acquired under the Plans will be effected through thefacilities of, and in accordance with the rules and laws applicableto, a stock exchange or organized market outside of Canadaon which the Shares may be listed or quoted for trading;

36. The Legislation of certain of the Jurisdictionsdoes not contain exemptions from the Prospectus and RegistrationRequirements for Award exercises by Participants, Former Participantsor Permitted Transferees through the Agent where the Agentis not a registrant;

37. Where the Agent sells Shares acquiredunder the Plans on behalf of Participants, Former Participantsor Permitted Transferees, the Participants, Former Participants,Permitted Transferees or the Agent may not be able to relyon the exemptions from the Prospectus and Registration Requirementscontained in the Legislation;

38. The acquisition by Solectron of Sharespursuant to the Award Acquisitions may be an issuer bid asdefined in the Legislation. The exemptions in the Legislationfrom the Issuer Bid Requirements may not be available forthese acquisitions by Solectron of its Shares from Participants,Former Participants or Permitted Transferees in accordancewith the terms of the Plans, since these acquisitions mayoccur at a price that is not calculated in accordance withthe "market price," as that term is defined in theLegislation and may be made from persons other than Participantsor former Participants;

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 and Prospectus Requirementswill not apply to certain trades or distributions of Awardsmade in connection with the Plans, including trades or distributionsinvolving the Solectron Companies, the Agents, Participants,Former Participants, and Permitted Transferees, providedthat the first trade in any securities acquired throughthe Plans pursuant to this Decision will be deemed a distribution,or a primary distribution to the public under the Legislation;

(b) the first trade by Participants, FormerParticipants or Permitted Transferees in Shares acquiredpursuant to this Decision, including first trades effectedthrough the Agent, shall not be subject to the Registrationand Prospectus Requirements, provided that the conditionsin subsection 2.14(1) of Multilateral Instrument 45-102- Resale of Securities, other than the requirementsof paragraph 2.14(1)(a), are satisfied; and

(c) the Issuer Bid Requirements shall notapply to the acquisition by Solectron of Shares from Participants,Former Participants or Permitted Transferees in connectionwith the Plans provided such acquisitions are made in accordancewith the provisions of the Plans.

November 8, 2002.

"Paul M. Moore"                    "HaroldP. Hands"