Exemption Orders (Discretionary)
PEREGRINE SYSTEMS, INC.
2001 BCSECCOM 730
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c.418
AND
IN THE MATTER OF PEREGRINE SYSTEMS, INC.
Exemption Order Under Section 48 and 114(2)(c)
[para 1]
WHEREAS Peregrine Systems, Inc. (“Peregrine”) has applied to the Executive Director for an order:
(a) under section 48 of the Securities Act, R.S.B.C. 1996, c.418 that intended trades by or on behalf of employees resident in British Columbia (the “B.C. Employees”) of Peregrine or its affiliates (collectively, the “Peregrine Companies”): (i) in shares of common stock of Peregrine (the "Common Shares") under the Peregrine Employee Stock Purchase Plan (the “ESPP”); and (ii) in Common Shares acquired in connection with the Peregrine 1994 Stock Option Plan (the “1994 SOP”) and the Peregrine 1999 Stock Option Plan (the “1999 SOP”) (the ESPP, 1994 SOP and 1999 SOP, collectively, the “Plans”), are exempt from the requirements of section 34(1)(a) of the Act;
(b) under section 114(2)(c) of the Act, that Peregrine is exempt from sections 105 to 108 and 110 of the Act with respect to certain repurchases of Common Shares under the SOPs;
[para 2]
AND WHEREAS Peregrine has represented to the Executive Director that:
1. Peregrine is a corporation incorporated under the laws of the state of Delaware;
2. Peregrine is a reporting issuer under the Act as a consequence of having acquired Telco Research Corporation Limited (“Telco”) by plan of arrangement (the “Plan of Arrangement”) in April, 2000;
3. as a result of the Plan of Arrangement, Peregrine became the sole security holder of Telco;
4. in addition to Telco, Peregrine currently has a number of direct and indirect subsidiaries in Canada, including Peregrine Systems of Canada, Inc., Peregrine Nova Scotia Company, and Harbinger Canada Corporation. None of these subsidiaries is a reporting issuer or its equivalent in Canada nor has any present intention of becoming a reporting issuer or its equivalent;
5. the majority of the directors and senior officers of Peregrine reside outside of Canada;
6. Peregrine is subject to the requirements of the United States Securities Exchange Act of1934, as amended, and the Common Shares are quoted for trading on the Nasdaq Stock Market;
7. the Common Shares offered under the Plans are registered with the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933;
8. the authorized share capital of Peregrine consists of 200,000,000 Common Shares, par value US$0.001 per share, and 5,000,000 shares of preferred stock (“Preferred Shares”) par value US$0.001 per share. As of June 30, 2000, there were 139,886,874 Common Shares and no Preferred Shares issued and outstanding;
9. Peregrine proposes to use the services of an agent (the "Agent") in connection with the Plans. The current Agent under the Plans is Salomon Smith Barney, Inc. (“SSB”). The current Agent is, and, if replaced, will be, a corporation registered under applicable U.S. securities or banking legislation and has been or will be authorized by Peregrine to provide services under the Plans. SSB is not a registrant in British Columbia and, if replaced, the Agent is not expected to be a registrant in British Columbia;
10. the Agent’s role in the Plans may include: (a) assisting B.C. Employees with the exercise of Options, including cashless exercises; (b) holding, on behalf of B.C. Employees or their Retirement Plans, as the case may be, Common Shares issued by Peregrine upon the exercise of Options or otherwise; and (c) facilitating the resale of Common Shares acquired by B.C. Employees or their Retirement Plans outside of Canada;
11. neither Peregrine nor the Agent will offer any advice to the B.C. Employees regarding the decision to acquire, hold, or sell Common Shares;
12. as of June 30, 2000, there were 59 employees in Canada eligible to participate in the Plans; one of the Canadian employees is currently a B.C. Employee;
13. the purpose of the ESPP is to provide employees of the Peregrine Companies with an opportunity to purchase Common Shares at a discount through accumulated payroll deductions;
14. participation in the ESPP by eligible Employees (the “ESPP Eligible Employees”) is voluntary and such employees are not induced to participate in the ESPP by expectation of employment or continued employment with the Peregrine Companies;
15. ESPP Eligible Employees may purchase, through accumulated payroll deductions, Common Shares at a discount to the market price, to a maximum of 15% of their Compensation, as defined in the ESPP. Subject to the discretion granted under the ESPP to the Board of Directors of Peregrine, Common Shares will be issued by Peregrine to the Agent on a semi-annual basis, based on the level of accumulated payroll deductions of each participating ESPP Eligible Employee, but subject to limits set forth in the ESPP. All purchased Common Shares will be held by the Agent in a separate investment account for each such employee and will be subject to a sixty (60) day hold period under the ESPP from the date of purchase, unless Common Shares were purchased before November 1, 2000, in which case they will be subject to a one (1) year hold period from the date of purchase;
16. the purpose of the 1994 SOP and the 1999 SOP (collectively, the “SOPs”) is to aid the Peregrine Companies in attracting, retaining and motivating management employees, including senior employees who are directors and officers (the “SOP Eligible Employees”), by granting Options to acquire Common Shares under the SOPs;
17. participation in the SOPs by SOP Eligible Employees is voluntary and SOP Eligible Employees are not induced to participate in the SOPs or to exercise their Options by expectation of employment or continued employment with the Peregrine Companies. Unless otherwise determined by the Administrator (as defined in the SOPs), Options are not transferable otherwise than by will or the laws of descent and distribution;
18. the consideration to be paid for Common Shares issued upon the exercise of Options granted under the SOPs may consist of: (a) cash, (b) promissory note, (c) other Common Shares, and/or (d) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the SOPs. The administrator under the SOPs may also offer to buy out or exchange Options previously granted for cash, Common Shares or other Options;
19. under the SOPs, an optionee has the right to exercise an option granted under the SOPs by delivering Common Shares previously owned by the optionee to Peregrine in payment of the exercise price of the option (a “Stock Swap Exercise”);
20. all disclosure material that Peregrine is required to file with the SEC will be provided or made available upon request to all ESPP Eligible Employees who acquire Common Sharesand to all SOP Eligible Employees who are granted Options, at the same time and in the same manner as such materials are provided or made available upon request to employees who are resident in the United States;
21. the B.C. Employees who acquire Options or Common Shares under the Plans will be provided with a copy of the Plans, as well as a copy of this order;
22. the distributions of Options and Common Shares to B.C. Employees are exempt from the requirements of sections 34(1)(a) and 61 of the Act and sections 45(2)(10), 45(2)(12)(iii), 74(2)(9) and 74(2)(11)(iii) of the Act;
23. the acquistion of Common Shares by Peregrine from an optionee on exercise of an option through a Stock Swap Exercise constitutes an issuer bid that is not exempt from the requirements contained in Part 13 of the Act as the calculation of the market price of the Common Shares under the SOPs does not conform with the requirements of the Securities Rules, B.C. Reg. 194/97;
24. an exemption from the registration requirements under the Act is not available for first trades by or on behalf of the B.C. Employees in Common Shares acquired under the Plans through the Agent;
25. because there is no market for the Common Shares in Canada and none is expected to develop, any resale of the Common Shares acquired under the Plans will be effected through the facilities of, and in accordance with the rules and laws applicable to the NASDAQ Stock Market or other stock exchange or market outside Canada on which the Common Shares may be listed or quoted for trading;
[para 3]
AND WHEREAS the Executive Director considers that to do so would not prejudicial to the public interest;
[para 4]
IT IS ORDERED:
1. under section 48 of the Act that first trades by or on behalf of B.C. Employees in Common Shares acquired under the Plans are exempt from the requirements of section 34(1)(a) of the Act, provided that:
(a) at the time of the acquisition of the Common Shares by the B.C. Employees, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as or as part of the same distribution as the security, persons whose last address as shown on the books of Peregrine was in Canada and who held securities of the class or series of which the Common Shares are a part did not hold more than 10 percent of the outstanding securities of the class or series;
(b) at the time of the acquisition of the Options by the B.C. Employees, the condition in paragraph 1(a) would have been satisfied for the Common Shares; and
(c) the trades in Common Shares are executed through an exchange or a market outside Canada; and
2. under section114(2)(c) of the Act that Peregrine is exempt from sections 105 to 108 and 110 of the Act with respect to the acquisition of Common Shares by Peregrine from BC Employees pursuant to a Stock Swap Exercise.
[para 5]
DATED July 10, 2001.
Brenda Leong
Director