Exemption Orders (Discretionary)
PIVOTAL CORPORATION
COR#99/200
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF PIVOTAL CORPORATION
Exemption Order Under Section 76
WHEREAS Pivotal Corporation has applied to the British Columbia Securities Commission for an order under section 76 of the Securities Act, R.S.B.C. 1996, c. 418, that certain trades of common shares (the “Shares”) of Pivotalby British Columbia residents are exempt from the requirements of section 61 the Act;
AND WHEREAS Pivotal has represented to the Commission that:
1. Pivotal was incorporated in 1990 under the Company Act (British Columbia);
2. Pivotal will become a reporting issuer under the Act upon the date of issuance (the “Effective Date”) of a receipt for its prospectus (the “Prospectus”) in respect ofits initial public offering (the “IPO”);
3. approximately 3,500,000 Shares (the “IPO Shares”) will be offered under the IPO in British Columbia and in the United States, pursuant to a Form F-1 Registration Statement, not including an underwriters' over allotment option of 15%, the issuance of Shares on the conversion of outstanding preferred shares and the issuance of Shares on the exchange of existing Class B Shares for Shares;
4. upon the closing of its IPO, Pivotal's authorized share capital will consist of 200,000,000 Shares and 20,000,000 preferred shares, issuable in series;
5. as of the June 30, 1999, on a pro forma basis, after giving effect to the IPO, the conversion of outstanding preferred shares and the exchange of existing Class B common shares but before exercise of the underwriters’ over allotment option, there will be 19,483,123 Shares issued and outstanding (assuming no exercises of currently outstanding options) and there are an additional 1,454,687 Shares issuable upon the exercise of currently outstanding incentive stock options;
6. Pivotal has made application to list the Shares on the Nasdaq Stock Market Inc.'s National Market System;
7. the holders of more than 99% of the Shares that will be outstanding immediately before the IPO have entered into agreements (the “Lock-up Agreements”) pursuant to which the holders have agreed not to sell their Shares for 180 days after the date of the Prospectus and Form F-1 Registration Statement for the IPO without the consent of Pivotal’s lead managing underwriter;
8. under the Securities Rules, R.B.C. Reg. 194/97, trades in Shares issued prior to Pivotal becoming a reporting issuer under the Act and Shares acquired upon the exercise of options issued prior to Pivotal becoming a reporting issuer under the Act in reliance upon exemptions from the prospectus requirements under the Act are deemed to be distributions unless, among other things, Pivotal has been a reporting issuer under the Act for the 12 months immediately preceding the trade;
9. as of the June 30, 1999, British Columbia residents hold 3,038,000 Shares (the “BC Pre-IPO Shares”) and options (the “BC Pre-IPO Options”) to acquire 823,989 Shares (the “BC Pre-IPO Option Shares”) issued under exemptions from the prospectus requirements under the Act representing approximately 20 % of the Shares outstanding upon completion of the IPO (assuming no exercise of the underwriters’ over allotment option or incentive stock options) and will not be able to resell those Shares upon the expiry of the Lock-up Agreements without filing a prospectus or relying upon an exemption from the prospectus requirements under the Act unless, among other things, Pivotal has been a reporting issuer under the Act for the 12 months immediately preceding the trade;
10. as of the June 30, 1999, U.S. residents held approximately 12,468,337 Shares issued prior to the IPO under exemptions from the prospectus requirements under U.S. securities laws, representing approximately 64% of the Shares outstanding upon completion of the IPO (assuming no exercise of the underwriters’ over allotment option or incentive stock options) and will, subject to certain requirements, be able to resell those Shares upon the expiry of the Lock-up Agreements without filing a registration statement or relying upon an exemption from the prospectus requirements of U.S. securities law;
11. as of the June 30, 1999, U.S. resident optionholders held 589,000 options acquired prior to the IPO representing approximately 3% of the Shares outstanding upon completion of the IPO (assuming no exercise of the underwriters’ over allotment option or incentive stock options) will, subject to certain requirements, be able to resell the Shares acquired upon exercise of those options upon the expiry of the Lock-up Agreements without filing a registration statement or relying upon an exemption from the prospectus requirements of U.S. securities law;
12. British Columbia residents will acquire approximately 7,499,250 Shares under the Prospectus (upon the conversion of outstanding preferred shares and the exchange of existing Class B common shares and excluding the IPO Shares) representing approximately 38.5% of the Shares outstanding upon completion of the IPO (assuming no exercise of the underwriters’ over allotment option or incentive stock options) and will be able to resell those Shares upon the expiry of the Lock-up Agreements without filing a prospectus or relying upon an exemption from the prospectus requirements under the Act;
13. 2,953,634 or approximately 97.2% of the BC Pre-IPO Shares have been outstanding for more than 2 years and most of the remaining BC Pre-IPO Shares were issued pursuant to the exercise of options that had been outstanding for more than 2 years and consequently, if Pivotal were an exchange issuer and the resale requirements of the Vancouver Stock Exchange were to apply to Pivotal, substantially all of the BC Pre-IPO Shares could be resold without having to file a prospectus or rely upon exemptions from the prospectus requirements under the Act; and
14. approximately 81,540 Shares issuable upon the exercise of BC Pre-IPO Options representing 0.4% of the BC Pre-IPO Option Shares could be resold without having to file a prospectus or rely upon exemptions from the prospectus requirements under the Act if Pivotal were an exchange issuer;
AND WHEREAS the Commission considers that to do so would not be prejudicial to the public interest;
IT IS ORDERED effective July 8, 1999, under section 76 of the Act that any trade in BC Pre-IPO Shares and BC Pre-IPO Option Shares are exempt from the requirements of section 61 the Act provided that:
a) Pivotal is a reporting issuer and has been a reporting issuer for 180 days immediately preceding the trade;
b) if the seller is an insider of Pivotal, other than a director or senior officer of Pivotal, the seller has filed all records required to be filed under sections 87 and 90 of the Act;
c) if the seller is a director or senior officer of Pivotal, the seller has filed all records required to be filed under sections 87 and 90 of the Act and Pivotal has filed all records required to be filed under Part 12 of the Act and of the Securities Rules, R.B.C. Reg. 194/97;
d) the trade is not a distribution from the holdings of a control person;
e) no unusual effort is made to prepare the market or create a demand for the security; and
f) no extraordinary commission or other consideration is paid in respect of the trade.
DATED at Vancouver, British Columbia, on August 3, 1999.
Douglas M. Hyndman Joyce C. Maykut, Q.C.
Chair Vice Chair