Exemption Orders (Discretionary)
DUKE ENERGY CORPORATION
2001 BCSECCOM 705
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief granted from the registration requirements for trades in shares acquired by permitted transferees under an employee compensation plan - Relief also granted from the issuer bid requirements for the acquisition of shares by the issuer from employees and former employees at a price determined under the plan.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(a), 48, 105-108, 110 and 114(2)(c)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF DUKE ENERGY CORPORATION
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta and Ontario (the “Jurisdictions”) has received an application from Duke Energy Corporation ("Duke") for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that:
1.1 the requirement contained in the Legislation to be registered to trade in a security (the “Registration Requirement”) shall not apply to certain trades in shares of Duke common stock (“Shares”) made in connection with the Duke Energy Corporation 1998 Long-Term Incentive Plan (the “Plan”); and
1.2 the requirements relating to delivery of an offer and issuer bid circular and any notices of change or variation thereto, minimum deposit periods and withdrawal rights, taking up and paying for securities tendered to an issuer bid, disclosure, restrictions upon purchases of securities, bid financing, identical consideration and collateral benefits (collectively, the “Issuer Bid Requirements”) shall not apply to certain acquisitions by Duke of Shares pursuant to the Plan in each of the Jurisdictions;
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”) the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Duke has represented to the Decision Makers that:
3.1 Duke is a corporation incorporated under the laws of the state of North Carolina;
3.2 Duke is not a reporting issuer under the Legislation and has no present intention of becoming a reporting issuer under the Legislation;
3.3 Duke Solutions Canada Inc. ("Duke Solutions"), Duke Energy Marketing Canada Ltd. ("Duke Marketing"), and Duke Energy Marketing Ltd. Partnership ("Duke Partnership") are indirect, majority-owned subsidiaries of Duke (the “Current Duke Subs”);
3.4 the Current Duke Subs were created pursuant to the laws of Canada;
3.5 the authorized share capital of Duke consists of 1,000,000,000 Shares, 12,500,000 shares of preferred stock, (“Preferred Shares”), 10,000,000 shares of preferred stock A, (“A Shares”), and 1,500,000 shares of preference stock, (“Preference Shares”) of which 771,920,862 Shares were issued and outstanding as of April 27, 2001;
3.6 Duke is subject to the requirements of the United States Securities Exchange Act, 1934(the “1934 Act”) and is not exempt from the reporting requirements of the 1934 Act pursuant to Rule 12G 3-2 made under the 1934 Act;
3.7 Shares offered under the Plan are registered with the Securities and Exchange Commission (the "SEC") under the Securities Act, 1933;
3.8 the Shares are listed for trading on the New York Stock Exchange;
3.9 under the Plan, Duke may grant options on Shares (“Options”), stock appreciation rights, shares of restricted stock, performance awards, phantom stock and dividend equivalents (collectively, "Awards") to employees and directors of Duke and its affiliates (collectively, “Service Providers”) all of which Awards entitle the Service Providers to obtain either cash compensation, Shares and/or Duke restricted stock;
3.10 Duke proposes to engage the services of an agent or agents (the "Agent") in connection with the Plan;
3.11 the current Agent is E*TRADE Securities, Inc. (“E*TRADE”);
3.12 E*TRADE is, and, if replaced, the Agent will be, a corporation registered under applicable Unites States securities or banking legislation;
3.13 E*TRADE is not a registrant in any of the Jurisdictions and, if replaced, the Agent is not expected to be a registrant in any of the Jurisdictions;
3.14 the Agent’s role in the Plan will involve various administrative functions and may include: (i) facilitating the exercise of Awards under the Plan; (ii) maintaining accounts and holding Shares on behalf of participants (“Participants”) under the Plan; and (iii) facilitating the resale of Shares acquired under the Plan;
3.15 there are approximately 10 Canadian resident Service Providers (“Canadian Service Providers”) resident in the Jurisdictions eligible to participate in the Plan;
3.16 participation in the Plan is voluntary and Participants are not induced to participate in the Plan by expectation of employment or continued employment with Duke or its affiliates;
3.17 Participants may exercise certain of the Awards to acquire Shares;
3.18 a committee appointed by the Board of Directors of Duke (the “Committee”) shall establish procedures governing the exercise of Awards;
3.19 in order to exercise an Award, an Award holder must submit to Duke or to the Agent a written notice of exercise identifying the type and number of Awards being exercised, together with full payment for the Shares (if applicable) underlying the Award;
3.20 the exercise price of an Option may be paid in cash or, where permitted by the Committee, by way of a stock swap exercise (“Stock Swap Exercise”) or other types of cashless exercise;
3.21 if the Participant requests a Stock-Swap Exercise, the Participant must deliver to Duke, or to Duke via the Agent, Shares owned by the Participant having an aggregate fair market value equal to the exercise costs of the Options for which the Participant will receive an applicable number of Shares;
3.22 each Participant will receive:
3.22.1 a copy of the United States prospectus relating to the Plan; and
3.22.2 upon becoming a holder of Shares, the annual reports, proxy materials and other materials Duke is required to file with the SEC at the same time and in the same manner as the documents are provided to holders of Shares in the United States;
3.23 in certain circumstances Options may be transferred by a Participant without consideration to members of the Participant’s immediate family or to trusts, partnerships or corporations whose beneficiaries or owners are members of the Participant’s immediate family and/or to such other persons or entities as may be approved by the Committee (collectively, the “Permitted Transferees”);
3.24 in certain circumstances persons who received Options while they were Service Providers (“Former Service Providers”), Permitted Transferees, beneficiaries under a will or on intestacy and the legal representatives of all such persons, will continue to have limited rights in respect of Awards following the termination of the employment or services relationship of the Service Provider;
3.25 Canadian Service Providers, including Canadian Former Service Providers, Permitted Transferees, beneficiaries under a will or on intestacy and the legal representatives of all such persons, participating in the Plan (collectively, “Canadian Participants”), who wish to sell Shares acquired under the Plan, may do so through the Agent;
3.26 Duke will inform Service Providers in writing that they may sell any Shares acquired under the Plan by either selling them through the Agent or in compliance with the Registration Requirement;
3.27 at the time of any grant of Awards under the Plan, holders of Shares whose last address as shown on the books of Duke was in Canada will not hold more than 10% of the outstanding Shares and will not represent in number more than 10% of the total number of holders of Shares;
3.28 the Legislation of certain of the Jurisdictions does not contain exemptions from the Registration Requirement for certain trades, upon the exercise of Awards, in Shares to, by, with and on behalf to certain Canadian Participants, including trades carried out with or through the Agent;
3.29 the Legislation of certain of the Jurisdictions does not contain exemptions from the Registration Requirement to allow the Agent to sell Shares on behalf of Canadian Participants as permitted by the Plan;
3.30 the exemptions in the Legislation from the Issuer Bid Requirements may not be available for acquisitions by Duke of its Shares upon Stock Swap Exercises, since acquisitions relating to Stock Swap Exercises may not occur at a price that is calculated in accordance with the Legislation but, rather, Duke will acquire such Shares at fair market value as determined under the Plan;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
6. AND WHEREAS the Decision of the Decision Makers pursuant to the Legislation is that:
6.1 the Registration Requirement shall not apply to a trade, upon the exercise of an Award, in Shares made in connection with the Plan to, with or on behalf of Canadian Participants;
6.2 the first trade in Shares acquired by Canadian Participants upon the exercise of an Award shall not be subject to the Registration Requirement provided that such first trade is made through the Agent and is executed through a stock exchange or market outside of Canada; and
6.3 the acquisition of Shares by Duke pursuant to Stock Swap Exercises shall be exempt from the Issuer Bid Requirements where such acquisitions are effected in accordance with the Plan.
DATED this 3rd day of July, 2001.
Eric T. Spink, Vice-Chair Thomas G. Cooke, Q.C., Member