Mutual Reliance Review System for ExemptiveRelief Applications -- prospectus and registration relief fortrades of options and shares in connection with an employeeincentive program involving the Applicant, Participants, FormerParticipants and Permitted Transferees - registration relieffor first trades of shares acquired under such employee incentiveprogram - issuer bid relief in connection with acquisition ofAwards under employee incentive plan.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am.
OSC Rule 45-503 - Trades to Employees, Executivesand Consultants.
Multilateral Instrument 45-102 - Resale of Securities.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, BRITISH COLUMBIAAND ALBERTA
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
ADC TELECOMMUNICATIONS, 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 ADC Telecommunications, Inc.("ADC" or the "Company") for a decisionpursuant to the securities legislation of the Jurisdictions(the "Legislation") that:
(i) the requirements contained in the Legislationto be registered to trade in a security (the "RegistrationRequirements") and the requirement to file a prospectusand obtain a receipt (the "Prospectus Requirements")(the Registration Requirement and the Prospectus Requirementare, collectively, the "Registration and Prospectus Requirements")will not apply to certain trades in securities of ADC madein connection with ADC's Global Stock Incentive Plan (the"Plan");
(ii) the Registration and Prospectus Requirementswill not apply to first trades of shares of common stock acquiredunder the Plan executed on an exchange or market 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, taking up and paying for securitiestendered to an issuer bid, disclosure, restrictions upon purchasesof securities, bid financing, identical consideration andcollateral benefits together with the requirement to filea reporting form within 10 days of an exempt issuer bid andpay a related fee (the "Issuer Bid Requirements")will not apply to certain acquisitions by the Company of Awards(as defined below), including Shares (as defined below), andNew Options (as defined below) pursuant to the Plan in eachof 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.
AND WHEREAS ADC has represented to theDecision Makers as follows:
1. ADC is presently a corporation in goodstanding incorporated under the laws of Minnesota.
2. ADC and affiliates of ADC (the "ADCAffiliates") (ADC and the ADC Affiliates are, collectively,the "ADC Companies") supply equipment, softwareand services for telecommunications, cable television, broadcast,wireless, and enterprise networks.
3. ADC is registered with the U.S. Securitiesand Exchange Commission (the "SEC") in the U.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. The Company is not a reporting issuer inany of the Jurisdictions and has no present intention of becominga reporting issuer in any of the Jurisdictions.
5. The authorized share capital of ADC consistsof: 1,200,000,000 shares of common stock ("Shares")and 10,000,000 shares of preferred stock ("PreferredShares"). As of March 10, 2003, there were 801,929,103Shares, and no Preferred Shares issued and outstanding.
6. The Shares are quoted on the Nasdaq NationalMarket System (the "NASDAQ").
7. ADC intends to use the services of oneor more agents/brokers in connection with the Plan (each an"Agent"). UBS PaineWebber has been appointed asAgent under the Plan. UBS PaineWebber is not registered toconduct retail trades in securities in the Jurisdictions.UBS PaineWebber is registered under applicable U.S. securitiesor banking legislation and any other Agent appointed to takeon a broker type role in connection with the Plan, in additionto or in replacement of UBS PaineWebber will be a registrantin the Jurisdictions or a corporation registered under applicableU.S. securities or banking legislation and will be authorizedby ADC to provide services as an Agent under the Plan.
8. The role of the Agent may include: (a)disseminating information and materials to Participants inconnection with the Plan; (b) assisting with the administrationof and general record keeping for the Plan; (c) holding Shareson behalf of Participants, Former Participants and PermittedTransferees in brokerage accounts; (d) facilitating Awardand New Option (as defined below) exercises (including cashlessexercises) under the Plan; (e) facilitating the payment ofwithholding taxes, if any, by cash or the tendering or withholdingof Shares; (f) facilitating the reacquisition of Awards andNew Options under the terms of the Plan; and (g) facilitatingthe resale of Shares issued in connection with the Plan.
9. The purposes of the Plan are to: (a) aidin maintaining and developing key employees capable of assuringthe future success of the Company, and to offer such personnelincentives to put forth maximum efforts for the success ofthe Company's business; (b) enhance the Company's abilityto attract and retain the services of experienced and knowledgeableoutside directors; and (c) afford such key employees and outsidedirectors an opportunity to acquire a proprietary interestin the Company, thereby aligning their interests with theinterests of the Company's shareholders.
10. Subject to adjustments as provided forin the Plan and an increase made in accordance with U.S. law,the maximum number of Shares which shall be made availablefor issuance under the Plan is 149,308,431.
11. The Plan permits grants of: (a) optionson Shares ("Options"); stock appreciation rights("SARs"), restricted shares ("Restricted Stock"),restricted stock units ("Restricted Stock Units"),performance awards ("Performance Awards") and dividendequivalents ("Dividend Equivalents"); (Shares, Options,SARs, Restricted Stock, Restricted Stock Units, PerformanceAwards and Dividend Equivalents are, collectively, "Awards")to key employees and outside directors of the ADC Companies("Participants"), provided that Restricted StockUnits and Dividend Equivalents can be granted to outside directorsof the ADC Companies only.
12. Employees of the ADC Companies eligibleto participate in the Plan will not be induced to purchaseShares or to exercise Awards or New Options by expectationof employment or continued employment.
13. As of May 28, 2003, there were 442 personsin Canada eligible to receive Awards under or participatein the Plan: 4 persons resident in British Columbia, 233 personsresident in Alberta, 196 persons resident in Ontario and 9persons resident in Quebec.
14. All necessary securities filings havebeen made in the U.S. in order to offer the Plan to Participantsresident in the U.S.
15. A prospectus prepared according to U.S.securities laws describing the terms and conditions of thePlan will be delivered to each Participant who receives anAward under the Plan. The annual reports, proxy materialsand other materials ADC provides to its U.S. shareholderswill be provided or made available upon request to Participantsresident in the Jurisdictions who acquire and retain Sharesunder the Plan at substantially the same time and in substantiallythe same manner as such documents would be provided to U.S.shareholders. All such documents may be delivered electronicallyto Participants.
16. The Plan is administered by a committeeappointed by the board of directors of ADC (the "Committee").
17. Generally, in order to exercise an Optionunder the Plan, an optionee must submit a written notice ofexercise to ADC or to the Agent identifying the Option, thenumber of Shares being purchased and the method of payment.
18. Among other payment methods, the Planprovides that payment for Shares acquired pursuant to thePlan may be made: (a) in cash; (b) by the surrender of Sharesowned by the Participant to the Company for cancellation ("Stock-SwapExercises") or to the Agent for resale; (c) in the caseof Option exercise, by the retention of a number of Sharesby the Company from the total number of Shares into whichthe Option is exercised; or (d) by a combination of the foregoing.
19. 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 determined by the Committee; provided,however, that such exercise price shall not be less thanthe average of the high and low daily trading prices (roundeddown to the nearest whole cent) of a Share as reported onthe NASDAQ, if the Shares are then quoted on the NASDAQ or(ii) the average of the high and low daily trading prices(rounded down to the nearest whole cent) of a Share on a nationalsecurities exchange, if the shares are then being traded ana national securities exchange on the date of grant of suchOption.
20. The term of each Option will be fixedby the Committee provided however that the term shall be nomore than ten (10) years from the date of the grant.
21. ADC proposes to offer Participants, whoare employees, the opportunity to participate in an Optionexchange program (such program being the "Option Exchange")in which such Participants are offered to exchange existing"underwater" Options for replacement options ("NewOptions") granted at least six months and one day afterthe existing Options are cancelled (such cancellations being"Option Exchange Cancellations"). If Participantselect to participate, their existing Options will be exchangedfor a lesser number of New Options. The "exchange ratio"from existing Options to New Options will vary, dependingon the exercise price of the existing Options.
22. Subject to the following exception, ifa Participant in the Option Exchange is no longer an employeeof the ADC Companies on the date the New Options are granted(such date is the "New Option Grant Date"), suchParticipant will not receive a New Option (nor any compensationin lieu of a New Option). If the Participant dies or is terminatedinvoluntarily, for any reason other than termination for cause,during the six month and one day period between the time whenexisting Options granted under the Plan are cancelled andthe New Option Grant Date, then such Participant will receivethe New Option covering 20% of the number of optioned Sharesthat he or she would have received if the Participant werean employee on the New Option Grant Date as a New Option grant.
23. In addition, Options may be replaced orexchanged for re-pricing and other purposes in accordancewith the terms of the Plan (such Option replacements and exchangesand the Option Exchange Cancellations are, collectively, "OptionCancellations").
24. ADC shall have the right to deduct applicabletaxes from any payment under the Plan by withholding, at thetime of delivery or vesting of cash or Shares under the Plan,an appropriate amount of cash or Shares ("Share WithholdingExercises") or a combination thereof for a payment oftaxes required by law or to take such other action as maybe necessary in the opinion of ADC or the Committee to satisfyall obligations for the withholding of such taxes.
25. No Award shall be assignable or transferableexcept to a designated beneficiary (under procedures establishedby ADC) or by the laws of descent and distribution in thecase of the death of a Participant. Each Award or right underany Award shall be exercisable during the Participant's lifetimeonly by the Participant, by a transferee pursuant to the termsof the Plan, or if, permissible under applicable law, by theParticipant's or such transferee's guardian or legal representative.Awards may not be pledged, alienated, attached or otherwiseencumbered, and any purported pledge, alienation, attachmentor encumbrance thereof shall be void and unenforceable againstthe ADC or any ADC Companies.
26. Following the termination of a Participant'srelationship with the ADC Companies for reasons of disability,retirement, termination, change of control or any other reason(such Participants being "Former Participants"),and on the death of a Participant where Awards have been transferredby will or pursuant to a beneficiary designation or the lawsof intestacy or otherwise as permitted under the Plan (suchbeneficiaries being "Permitted Transferees"), theFormer Participants and Permitted Transferees will continueto have rights in respect of the Plan ("Post-TerminationRights").
27. Post-Termination Rights may include, amongother things: (a) the right to exercise Awards for a perioddetermined in accordance with the terms of the Plan and theAward; and (b) the right to exercise Awards and to sell Sharesacquired under the Plan through the Agent.
28. Post-Termination Rights will only be effectivewhere such rights accrued while the Participant had a relationshipwith the ADC Companies.
29. 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 Plan will beeffected through the NASDAQ.
30. As of May 27, 2003, 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 ADC. If at any time duringthe currency of the Plan Canadian shareholders of ADC hold,in aggregate, greater than 10% of the total number of issuedand outstanding Shares or if such shareholders constitutemore than 10% of all shareholders of ADC, ADC will apply tothe relevant Jurisdiction for an order with respect to furthertrades to and by Participants in that Jurisdiction in respectof the Shares acquired under the Plan.
31. Pursuant to the Plan, the acquisitionof Awards, including Shares, and New Options by the Companypursuant to Stock Swap Exercises, Share Withholding Exercisesand Option Cancellations may constitute an "issuer bid".
32. The issuer bid exemptions in the Legislationmay not be available for such acquisitions by the Company.
33. The Legislation of all of the Jurisdictionsdoes not contain exemptions from the Prospectus and RegistrationRequirements for all the intended trades in New Options andShares acquired on the exercise of the New Options in connectionwith the Plan.
34. Where the Agents sell Shares on behalfof Former Participants and Permitted Transferees, the Agents,Former Participants and Permitted Transferees may not be ableto rely upon the exemptions from the Prospectus and RegistrationRequirements contained in the Legislation of the Jurisdictions.
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 or NewOptions made in connection with the Plan, including tradesor distributions involving ADC or its affiliates, the Agent,Former Participants or Permitted Transferees, provided thatthe first trade in Shares acquired on the exercise of Awardsor New Options pursuant to this Decision will be deemed adistribution or primary distribution to the public under theLegislation unless the conditions in subsection 2.14(1) ofMultilateral Instrument 45-102 "Resale of Securities"are satisfied;
(b) the first trade by Former Participantsor Permitted Transferees in Shares acquired pursuant to theexercise of Awards or New Options, including first tradeseffected through the Agent, will not be subject to the Prospectusand Registration Requirements, provided such first trade isexecuted through an exchange or a market or to a person orcompany outside of Canada; and
(c) the Issuer Bid Requirements will not applyto the acquisition by ADC of Awards or New Options from Participants,Former Participants or Permitted Transferees in connectionwith the Plan provided such acquisitions are made in accordancewith the provisions of the Plan.
July 22, 2003.
"Robert W. Davies"
"Harold P. Hands"