Ruling under subsection 74(1) - Relief from registration and prospectus requirements for trades in common shares of the filer in connection with the exercise of certain options - options were granted to employees of another company - the parent of that company and the filer merged and the filer assumed the outstanding and unvested options - exemptions in National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) are not available as the options were not issued by the filer and not all option holders are current employees of the filer.
Relief from the registration requirement for first trades in the common shares issued upon the exercise of the options - the exemption in s. 2.28 of NI 45-106 is not available as the filer is a reporting issuer in Quebec as a result of a previous merger transaction - the filer has a de minimis presence in Canada - all trades must be made through an exchange, or a market, outside of Canada or to a person or company outside of Canada.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
The Ontario Securities Commission (the Commission) has received an application from the Filer for a ruling under subsection 74(1) of the Act that:
(a) the dealer registration requirement and the prospectus requirement do not apply to a trade by the Filer in common shares of the Filer (Common Shares) to Peregrine Option Holders (as defined below), or their legal representatives or permitted transferees, in accordance with the terms and conditions of the Assumed Options (as defined below) (the Exercise Requested Relief); and
(b) the dealer registration requirement does not apply to the first trade in the Common Shares issued upon the exercise of the Assumed Options (the First Trade Registration Relief and together with the Exercise Requested Relief, the Requested Relief).
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this ruling unless they are defined in this ruling.
This ruling is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of Delaware and is not a reporting issuer in any jurisdiction of Canada except Quebec. The Filer is subject to the reporting requirements of the 1934 Act.
2. The Common Shares are listed on the New York Stock Exchange, Inc., the Pacific Exchange and the NASDAQ National Market.
3. The authorized share capital of the Filer consists of 9,600,000,000 Common Shares with a par value of US$0.01 each and 300,000,000 shares of preferred stock with a par value of US$0.01 each. As at January 17, 2006, there were 2,820,994,045 Common Shares and no shares of preferred stock of the Filer issued and outstanding.
4. Hewlett-Packard (Canada) Ltd. (HP Canada), a wholly-owned subsidiary of the Filer, is a corporation incorporated under the federal laws of Canada. HP Canada is not a reporting issuer in any jurisdiction of Canada and does not have any present intention of becoming a reporting issuer in any jurisdiction of Canada.
5. In Canada, the Filer has the following equity compensation plans, among others: the HP 2004 Stock Incentive Plan, the HP 2000 Employee Stock Purchase Plan and the HP 2000 Stock Plan (collectively, the Existing HP Plans).
6. Peregrine Systems, Inc. (Peregrine) was a corporation incorporated under the laws of the state of Delaware and was not a reporting issuer in any jurisdiction in Canada. Before December 19, 2005, Peregrine was subject to the reporting requirements of the 1934 Act and on that date filed the applicable notice with the SEC terminating the registration of its securities under the 1934 Act.
7. The authorized share capital of Peregrine consisted of 100,000,000 shares of common stock with a par value of US$0.0001 per share and 5,000,000 shares of preferred stock with a par value of US$0.0001 per share. As of November 11, 2005, there were 15,568,452 shares of common stock and no preferred stock of Peregrine issued and outstanding.
8. Peregrine Canada, Inc. (Peregrine Canada) was a corporation incorporated under the laws of Ontario and was not a reporting issuer in any jurisdiction of Canada.
9. The Filer and Peregrine, together with Lake Merger Company, a wholly-owned subsidiary of the Filer, entered into a merger agreement dated as of September 19, 2005 (the Merger Agreement), pursuant to which, and subject to certain conditions, Peregrine was to become a subsidiary of the Filer (the Merger).
10. The Merger Agreement was adopted by stockholders of Peregrine at a meeting held on December 15, 2005 and the Merger subsequently became effective.
11. On the effective date of the Merger, without issuing any new options to Peregrine Canada employees, the Filer assumed the outstanding and unvested options (the Peregrine Options) previously awarded by Peregrine to Peregrine Canada employees resident in Ontario (the Peregrine Option Holders) under the Peregrine 2003 Equity Incentive Plan (the Peregrine Plan) and, pursuant to such assumption, the Peregrine Options became options to purchase Common Shares (the Assumed Options).
12. The number of Common Shares to be issuable upon the exercise of each Assumed Option and the exercise price per share under each Assumed Option were calculated according to a predetermined formula. The duration and other material terms of the Assumed Options are the same as they existed immediately prior to the effective time of the Merger.
13. There are approximately 14 Peregrine Option Holders holding Assumed Options exercisable for 8,326 Common Shares.
14. The Peregrine Option Holders were former Peregrine Canada employees and are now employed by HP Canada.
15. No further Peregrine Options will be issued under the Peregrine Plan.
16. The Filer uses the services of the same agents (Agents) in connection with the Peregrine Plan as it does with the HP 2004 Stock Incentive Plan. The current Agents are StockCross Financial Services Inc. (formerly, Fiserv Investor Services, Inc.), Morgan Stanley, Smith Barney and Computershare Investor Services. The Agents are, and if replaced will be, corporations registered under applicable U.S. securities legislation to trade in securities and have been or will be authorized to provide services under the Peregrine Plan.
17. Subject to the discretion of the applicable plan administrator to permit transfers to permitted transferees in accordance with the terms of the Peregrine Plan and to applicable securities laws, the Assumed Options are not transferable otherwise than by will or the laws of descent and distribution.
18. All the disclosure documentation made available to the Filer's employees resident in the United States who receive options under the Existing HP Plans will be made available to the Peregrine Option Holders.
19. Participation in the Peregrine Plan is voluntary and the Peregrine Option Holders will not be induced to continue to participate in the Peregrine Plan or acquire Common Shares under the Peregrine Plan by expectation of employment or continued employment.
20. Because there is no market for the Common Shares in Canada and none is expected to develop, any trades of the Common Shares by the Peregrine Option Holders, their legal representatives or permitted transferees or the Agents will be effected through the facilities of and in accordance with the rules of one of the exchanges or markets outside of Canada on which the Common Shares are traded.
21. As at August 8, 2006, residents of Canada did not own, directly or indirectly, more than 10 percent of the outstanding Common Shares and did not represent in number more than 10 percent of the total number of owners, directly or indirectly, of Common Shares.
The Commission is satisfied that it would not be prejudicial to the public interest to grant the Requested Relief.
It is ruled, pursuant to subsection 74(1) of the Act, that the Exercise Requested Relief is granted provided that the first trade in the Common Shares issued upon the exercise of each Assumed Option is deemed to be a distribution unless the following conditions are satisfied:
(a) at the time of the issuance of the Common Shares upon the exercise of the Assumed Option (the Exercise Time), the Filer is not a reporting issuer in any jurisdiction of Canada except Quebec;
(b) at the Exercise Time, after giving effect to the issuance of the Common Shares and any other Common Shares that were issued at the same time as or as part of the same distribution, residents of Canada
(i) did not own directly or indirectly more than 10 percent of the outstanding Common Shares, and
(ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of Common Shares; and
(c) the trade is made
(i) through an exchange, or a market, outside of Canada, or
(ii) to a person or company outside of Canada.
It is further ruled, pursuant to subsection 74(1) of the Act, that the First Trade Registration Relief is granted provided that the conditions set out in paragraphs (a), (b) and (c) under the ruling granting the Exercise Requested Relief are satisfied.
DATED September 29, 2006.