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VERITAS Software Corporation - 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
ONTARIO, BRITISH COLUMBIA,ALBERTA AND
NEW BRUNSWICK
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
VERITAS SOFTWARE CORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia, Alberta and New Brunswick (the"Jurisdictions") has received an application fromVERITAS Software Corporation ("VERITAS" or the "Company")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that (i) the dealerregistration requirement contained in the Legislation (the "RegistrationRequirement") and the prospectus requirement containedin the Legislation (the "Prospectus Requirement")(the Registration Requirement and the Prospectus Requirementare, collectively, the "Registration and Prospectus Requirements")will not apply to certain trades in securities of VERITAS madein connection with the VERITAS Software Corporation 1993 EquityIncentive Plan (the "EIP"), the VERITAS Software Corporation1993 Employee Stock Purchase Plan (the "1993 ESPP")and the VERITAS Software Corporation 2002 International EmployeeStock Purchase Plan (the "2002 International ESPP";the 1993 ESPP and the 2002 International ESPP are, collectivelythe "ESPPs" and the EIP and the ESPPs are, collectively,the "Plans"); (ii) the Registration and ProspectusRequirements will not apply to first trades of Shares (as definedbelow) acquired under the Plans made through an exchange ormarket outside of Canada or to a person or company outside ofCanada; and (iii) 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, take-up and payment for securitiestendered to an issuer bid, disclosure, restrictions upon purchasesof securities, financing, identical consideration, collateralbenefits, together with the requirement to file a reportingform within ten (10) days of an exempt issuer bid and pay arelated fee (the "Issuer Bid Requirements") will notapply to certain acquisitions by the Company of Shares pursuantto 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 VERITAS has represented tothe Decision Makers as follows:
1. VERITAS is presently a corporation in goodstanding incorporated under the laws of the State of Delaware.
2. VERITAS and affiliates of VERITAS (the"VERITAS Affiliates") (VERITAS and the VERITAS Affiliatesare, collectively, the "VERITAS Companies") provideessential storage software solutions that enable customersto protect and access their business-critical data.
3. VERITAS is registered with the SEC in theU.S. under the 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. On or about June 1, 1999, VERITAS completedthe acquisition of TeleBackup Systems Inc. ("TeleBackup")in exchange for approximately 1.6 million Shares. The acquisitionof TeleBackup by VERITAS (the "TeleBackup Transaction")was structured as a plan of arrangement involving VERITAS,TeleBackup, VERITAS Holding Corporation and certain otherof the VERITAS Affiliates (defined below). An applicationfor discretionary relief was submitted by VERITAS and TeleBackupto certain regulatory authorities in Canada in connectionwith the TeleBackup Transaction and an MRRS Decision documentdated June 1, 1999 was rendered by such regulators.
5. VERITAS became a reporting issuer in BritishColumbia on June 1, 1999 as a result of the TeleBackup Transactionand has remained a reporting issuer in British Columbia sincethat date. VERITAS 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 VERITASconsists of: 2,000,000,000 shares of common stock ("Shares")and 10,000 shares of preferred stock ("Preferred Shares").As of March 18, 2002, there were 408,555,769 Shares and noPreferred Shares issued and outstanding.
7. The Shares are quoted on the NASDAQ (the"Nasdaq") under the ticker symbol "VRTS".
8. VERITAS 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 US") 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 US is not so registered.E*Trade US is registered to conduct retail trades under applicableU.S. securities or banking legislation. Any other Agent appointedin addition to, or in replacement of, E*Trade Canada or E*TradeUS will be a registrant 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 VERITAS to provide services as an Agent underthe Plans.
9. 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 the tenderingor withholding of Shares; (f) facilitating the reacquisitionof Awards (as defined below) under the terms of the Plans;and (g) facilitating the resale of Shares issued in connectionwith the Plans.
10. The purpose of the EIP is to provide incentivesto attract, retain and motivate eligible persons whose presentand potential contributions are important to the success ofthe VERITAS Companies, by offering them an opportunity toparticipate in the Company's future performance through grantsof Awards.
11. The purpose of the ESPPs is to provideEmployees designated by the Board (as defined below) as eligibleto participate in the ESPPs with a convenient means of acquiringan equity interest in the Company through payroll deductions,to enhance such Employees' sense of participation in the affairsof the VERITAS Companies, and to provide an incentive forcontinued employment.
12. Subject to adjustment as described inthe Plans and increases made in accordance with U.S. law,the maximum number of Shares that may be issued pursuant tothe Plans is: under the 1993 ESPP, 1,000,000 Shares; and,in the aggregate, under the 2002 International ESPP, the 1993ESPP and the VERITAS Software Corporation 2002 Employee StockPurchase Plan (the "2002 ESPP") (which is not offeredto employees in Canada), 21,893,518 Shares. Share issuancesunder the 1993 ESPP and the 2002 ESPP shall reduce on a Share-for-Sharebasis the number of Shares issued under the 2002 InternationalESPP, and annually, in January, the aggregate number of Sharesavailable for purchase under the 2002 International ESPP andthe 2002 ESPP shall automatically be increased by 1% of theShares outstanding as of December 31 of the immediately precedingcalendar year, but in no event shall such number exceed 600,000Shares per year subject to periodic adjustments permittedunder the 2002 International ESPP; and under the EIP, as ofMay 27, 1999, 20,000,000 Shares were reserved for issuance,plus an annual increase of 4.5% of the Shares outstandingas of December 31 of the immediately preceding calendar year,but in no event shall such number exceed 8,000,000 Sharesper year, plus any additional Shares issuable under certainprior plans of VERITAS. Since May 27, 1999, there have beenthree stock splits that affected the number of Shares available:On July 8, 1999, there was a 2-for-1 stock split; on November19, 1999, there was a 3-for-2 stock split; and on March 3,2000, there was a 3-for-2 stock split.
13. All necessary securities filings havebeen made in the U.S. in order to offer the Plans to Participantsresident in the U.S.
14. The EIP permits grants of: (a) optionson Shares ("Options"); (b) restricted stock awards("Restricted Stock Awards"); and (c) stock bonuses("Stock Bonuses"); (Shares, Options, RestrictedStock Awards, Stock Bonuses are, collectively, "Awards")to employees ("Employees"), non-employee directors("Directors") and consultants ("Consultants")(Employees, Directors and Consultants are, collectively, "Participants")of the VERITAS Companies.
15. Under the ESPPs, Employees are offeredan opportunity to purchase Shares by means of applying accumulatedpayroll deductions at a discounted price determined in accordancewith the terms of the ESPPs.
16. As of May 31, 2002, there were 55 personsin Canada eligible to receive Awards under or participatein the Plans: 10 persons resident in British Columbia; 3 personsresident in Alberta; 2 persons resident in New Brunswick;35 persons resident in Ontario, and; 5 persons resident inQuebec.
17. Employees eligible to participate in thePlans will not be induced to purchase Shares or to exerciseAwards by expectation of employment or continued employment.
18. Officers of the VERITAS 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.
19. Consultants who participate in the EIPwill not be induced to exercise Options by expectation ofthe individual Consultant, the Consultant's company or theConsultant's partnership being engaged or continuing to beengaged as a Consultant.
20. The Plans are administered by a committee(the "Committee") appointed by the board of directorsof VERITAS (the "Board").
21. It is anticipated that Consultants (asused herein, "consultant" includes a "consultantcompany" as defined in the OSC Rule 45-503) who willbe granted Awards under the EIP, to the extent permitted,will: (a) provide technical, business, management or otherservices to the VERITAS Companies (other than services relatingto the sale of securities or promotional/investor relationsservices); (b) provide consulting services to the VERITASCompanies under a written contract; (c) have a relationshipwith the VERITAS Companies that will permit them to be knowledgeableabout the business affairs of the VERITAS Companies; and (d)will spend a significant amount of time and attention on theaffairs and business of one or more of the VERITAS Companies.
22. Following the termination of a Participant'srelationship with the VERITAS 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").
23. Post-Termination Rights may include, amongother things, (a) the right to exercise Awards for a perioddetermined in accordance with the EIP; and (b) the right tosell Shares acquired under the Plans through the Agent.
24. Post-Termination Rights will only be availableif the Awards or rights to which they relate were grantedto the Participant while the Participant was a service providerand no new Awards or rights will be granted to Former Participantsunder the Plans.
25. Among other payment methods, the EIP providesthat payment for Shares acquired pursuant to the EIP may bemade: (a) in cash; (b) in the case of an Option exercise,by a cashless exercise method; (c) in the case of an Optionexercise, by a margin commitment; (d) in the case of an Optionexercise, by the retention of a number of Shares by the Companyfrom the total number of Shares into which the Option is exercised;or (e) by a combination of the foregoing.
26. Options may be forfeited by EIP Participantsto the extent such Options are not exercised within the timeperiod prescribed under the EIP or where the EIP Participant'srelationship with VERITAS is terminated or where Options arecancelled on a merger or sale of assets or on the dissolutionor liquidation of VERITAS ("Option Cancellations").
27. Under the EIP, the Committee may (i) reserveto itself a right in the Award Agreement (as such term isdefined in the EIP) to repurchase a portion of or all Shareswhich have not yet vested that are held by a Participant followingsuch Participant's Termination (as such term is defined inthe EIP) at any time within ninety (90) days after the laterof Participant's Termination Date (as such term is definedin the EIP) and the date a Participant purchases Shares underthe EIP, for cash and/or cancellation of purchase money indebtedness,at the Participant's Exercise Price or Purchase Price, asthe case may be; (ii) at any time, with the consent of a Participant,authorize to issue new Awards in exchange for the surrenderand cancellation of any or all outstanding Awards; and (iii)may buy out for a payment in cash or Shares or other consideration,an Award previously granted on terms and conditions determinedby the Committee (collectively, such transactions are "AwardBuyouts").
28. VERITAS 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 VERITAS or the Committeeto satisfy all obligations for the withholding of such taxes
29. The annual reports, proxy materials andother materials VERITAS is required to file with the SEC willbe provided to Canadian Participants at the same time andin the same manner as the documents are provided or made availableto U.S. Participants.
30. Canadian shareholders do not own, directlyor indirectly, more than 10% of the issued and outstandingShares and do not represent in number more than 10% of theshareholders of VERITAS. If at any time during the currencyof the Plans Canadian shareholders of VERITAS 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 VERITAS, VERITAS will apply to the relevantJurisdiction for an order with respect to further trades toany by Participants, Former Participants and Permitted Transfereesin that Jurisdiction in respect of Shares acquired under thePlans.
31. Participants, Former Participants or PermittedTransferees may exercise Awards and sell Shares acquired underthe Plans through an Agent.
32. 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.
33. 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.
34. Where the Agent sells Shares on behalfof Participants, Former Participants or Permitted Transferees,the Participants, Former Participants, Permitted Transfereesor the Agent may not be able to rely on the exemptions fromthe Prospectus and Registration Requirements contained inthe Legislation.
35. The acquisition by VERITAS of Awards pursuantto the Award Acquisitions may be an issuer bid as definedin the Legislation. The exemptions in the Legislation fromthe Issuer Bid Requirements may not be available for theseacquisitions by the Company 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 any trade or distribution of Awards madein connection with the Plans, including trades and distributionsinvolving the VERITAS Companies the Agents, Participants,Former Participants, and Permitted Transferees, providedthat the first trade in Shares acquired through the Planspursuant to this Decision will be deemed a distributionunder the Legislation unless the conditions in Subsection2.6(3) or (4) of Multilateral Instrument 45-102 are satisfied;
(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 the conditions inSubsection 2.6(3) or (4) of Multilateral Instrument 45-102are satisfied; and
(c) the Issuer Bid Requirements shall notapply to the acquisition by VERITAS of Awards from Participants,Former Participants or Permitted Transferees in connectionwith the Plans provided such acquisitions are made in accordancewith the provisions of the Plans.
January 10, 2003.
"Howard I. Wetston" "TheresaMcLeod"