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E.piphany, Inc. - ss.74(1) and c.104(2)(c)
Headnote
Subsection74(1) - Registration relief for exercise of options by currentand former Canadian employees, directors and officers of a foreignissuer where trades made through an agent - first trade relief. Subsection104(2)(c) - Issuer bid relief for foreign issuer in connectionwith requisition of shares under stock plans.Ontariostatutory provisions cited.
SecuritiesAct, R.S.O. 1970, c.S.5, as an sec. 25, 35(1)(12)(iii), 35(1)(17),74(1), 95, 96, 97, 98, 100, 104(2)(c)RegulationsCited
Regulationmade under the Securities Act - RRO 1990, Reg 1015, as am, s.183(1), 203.1, 204(1)RulesCited
OSCRule 45-503 - Trades to Employees, Executors and Consultants.INTHE MATTER OF
THESECURITIES ACT, R.S.O. 1990,
CHAPTERS.5 AS AMENDED (THE "ACT")
AND
INTHE MATTER OF
E.PIPHANY,INC.
RULINGAND ORDER
(subsection74(1) and clause 104(2)(c))
UPONthe application of E.piphany, Inc. ("E.piphany"or the "Applicant") to the Ontario SecuritiesCommission (the "Commission") for a rulingpursuant to subsection 74(1) of the Act that certain tradesin common shares in the capital of the Applicant ("Shares")and options exercisable for Shares ("Options")issued pursuant to the E.piphany 1999 Stock Plan (the "StockPlan") and the E.piphany 1999 Employee Stock PurchasePlan (the "ESPP"), (collectively, the "Plans")shall not be subject to section 25 of the Act (the "RegistrationRequirement") and for an order pursuant to clause 104(2)(c)of the Act that sections 95, 96, 97, 98 and 100 of the Act andsection 203.1 of the regulation (the "Regulation")made under the Act (collectively, the "Issuer Bid Requirements")shall not apply to certain acquisitions by the Applicant ofsecurities of its own issue pursuant to the plans;
ANDUPON considering the Application and the recommendationof staff of the Commission; ANDUPON the Applicant having represented to the Commissionthat: 1.E.piphany is a corporation incorporated under the laws of thestate of Delaware. The executive offices of E.piphany are locatedin San Mateo, California. 2.E.piphany is registered with the Securities Exchange Commission(the "SEC") in the United States under the UnitedStates Securities Exchange Act of 1934 (the "ExchangeAct") and is not exempt from the reporting requirementsof the Exchange Act pursuant to Rule 12G 3-2 made thereunder. 3.The Shares are quoted on the NASDAQ National Market ("NASDAQ")under the symbol "EPNY". 4.E.piphany is not a reporting issuer in Ontario and has no presentintention of becoming a reporting issuer in Ontario. The majorityof the directors and senior officers of E.piphany reside outsideof Canada. 5.The authorized share capital of E.piphany consists of 500,000,000Shares and 25,000,000 shares of preferred stock ("PreferredShares). As of June 30, 2001, there were 70,567,520 Sharesand no Preferred Shares issued and outstanding. 6.Under the Stock Plan, Options may be granted to employees of E.piphanyand its affiliates (the "E.piphany Companies").Under the ESPP, employees of the E.piphany Companies are ableto purchase Shares. (Employees participating in the Stock Planand the ESPP are referred to as the "Participants"). 7.Participants will not be induced to exercise Options or purchaseShares by expectation of employment or continued employment. 8.The Plans are administered by the board of directors (the "Board")of E.piphany and/or a committee appointed by the Board (the "Committee"). 9.The purpose of the ESPP is to provide employees of the E.piphanyCompanies an opportunity to purchase Shares through payroll deductions. 10.The purpose of the Stock Plan is to facilitate the attractionand retention of selected personnel by providing a means by whichselected employees of the E.piphany Companies may be given anopportunity to purchase Shares and to benefit from increases inthe value of the Shares. 11.All necessary securities filings have been made in the UnitedStates in order to offer the Plans to participants resident inthe United States. 12.A prospectus prepared according to U.S. securities laws describingthe terms and conditions of the Plans will be delivered to eachemployee who is eligible to participate in the ESPP and to eachParticipant who is granted an Option under the Stock Plan. Theannual reports, proxy materials and other materials E.piphanyis required to file with the SEC will be provided or made availableto Canadian Participants who become shareholders at the same timeand in the same manner as the documents are provided or made availableto United States shareholders. 13.Options and rights under the Plans may not be assigned, transferred,pledged or otherwise disposed of other than by will or the lawsof intestacy. 14.Following the termination of a Participant's relationship withthe E.piphany Companies, a former Participant or in some casesthe Participant's or former Participant's estate, the legal representativeof a Participant or of a former Participant, or the beneficiaryof a Participant or Former Participant by a designation or bywill or the laws of intestacy (collectively, the "FormerParticipants") will continue to have rights in respectof the Plans. Post-termination rights may include, among otherthings, the right of a Former Participant to exercise an Awardfor a specified period following termination and the right tosell Shares acquired under the Plans through the Agents. 15.E.piphany intends to use the services of one or more agents/brokers(the "Agents") for each of the Plans. The currentAgent for the Plans is E*TRADE Securities, Inc. The current Agentis, and if replaced, or if additional Agents are appointed, willbe registered under applicable U.S. securities or banking legislationand has been or will be authorized by E.Piphany to provide servicesunder the Plans. The Agents are not registered to conduct retailtrades and, if replaced, or additional agents are appointed, arenot expected to be so registered in Ontario. 16.The Agents' role in the Plans may include: (a) assisting withthe administration of the Plans, including record-keeping functions;(b) facilitating the exercise of Awards granted under the Plans(including cashless exercises); (c) holding Shares issued underthe Plans on behalf of Participants and Former Participants; and(d) facilitating the resale of the Shares issued in connectionwith the Plans. 17.As there is no market in Ontario for the Shares and none is expectedto develop, it is expected that any resale of Shares will be effectedthrough the facilities of NASDAQ. 18.Currently, less than 10% of the outstanding Shares are held bypersons or companies whose last address as shown on the booksof the E.piphany is in Ontario and such persons or companies donot represent more than 10% of the total number of holders ofoutstanding Shares. 19.As of September 19, 2001, there were two employees in Ontarioeligible to participate in the Stock Plan and two employees inOntario eligible to participate in the ESPP. 20.An eligible employee may purchase Shares through accumulated payrolldeductions at a discount to the market price to a maximum of 15%of their Compensation (as defined in the ESPP). Subject to thediscretion granted under the ESPP to the Board or Committee, Shareswill be issued by E.piphany to the Agents on a periodic basisbased on the level of accumulated payroll deductions of each Employeeparticipating in the ESPP. 21.Generally, in order to exercise an Option, the Participant orFormer Participant, must submit to E.piphany or to the Agentsa written notice of exercise identifying the Option and the numberof Shares being exercised, together with full payment of the exerciseprice. The exercise price of an Option may be paid in cash, cashequivalent, or where permitted by the Committee, by way of a cashlessexercise, promissory note, or such other method as permitted bythe Committee. 22.Shares withheld or surrendered in payment of withholding taxesor exercise costs may either (i)be sold by the Agent on behalf of the Participant or Former Participantand the proceeds of the sale delivered to E.piphany and the Participantor Former Participant, as applicable, or (ii)be reacquired by E.piphany. 23.Shares reacquired by E.piphany from Participants or Formaer Participantswill either be cancelled by E.piphany or put back into treasury. 24.Ontario-resident Participants, including Former Participants,who wish to resell Shares acquired under the Plans may do so throughthe Agents ("First Trades"). 25.Rule 45-503 - Trades to Employees, Executors and Consultants(the "Employee Rule") does not contain exemptionsfrom the Registration Requirement for all the intended tradesin Shares under the Plans. 26.Where First Trades are made through the Agents by Former Participants,or where an Option is exercised by a Former Participant is madethrough the Agents, the Agents and the Former Participants willnot be able to rely upon the exemptions contained in the EmployeeRule. 27.The registration exemption contained in paragraph 35(1)(12)(iii)of the Act is not available to the Agent in connection with Optionexercises by Former Participants exercised through the Agent becauseunder subsection 204(1) the Agent is a "market intermediary" ("MarketIntermediary") in Ontario and is not registered underthe Act. 28.The registration exemption contained in paragraph 35(1)(17) ofthe Act is not available to the Agent in connection with the acquisitionof Shares by E.piphany through the Agent upon a Participant orFormer Participant tendering Shares in payment of the Option exerciseprice because the Agent is a Market Intermediary and is not registeredunder the Act. 29.No exemption is available from the Issuer Bid Requirements forcertain acquisitions by E.piphany of Shares in accordance withthe terms of the Plans since such acquisition may occur at a pricethat is not equal to the "market price", as that term is definedin subsection 183(1) of the Regulation. ANDUPON the Commission being satisfied that to do so wouldnot be prejudicial to the public interest; ITIS RULED, pursuant to subsection 74(1) of the Act, thatsection 25 of the Act shall not apply to: (i)the exercise of Options by Former Participants in accordance withthe Plans and effected through the Agents; (ii)acquisitions of Shares by E.piphany from Participants or FormerParticipants through the Agent in accordance with the provisionsof the Plans as a means of satisfying withholding taxes, the exerciseprice and transactions costs, if any, for Options; and (iii)the First Trade in Shares acquired under the Plans by Former Participantsmade through the Agents, provided that, at the time of such firsttrade, E.piphany is not a reporting issuer under the Act and suchfirst trade is executed on an exchange or market outside of Canada. ANDIT IS ORDERED, pursuant to subsection 104(2)(c) of theAct that acquisitions of Shares by E.piphany from Participantsor Former Participants in accordance with the provisions of thePlans are exempt from the Issuer Bid Requirements. December21, 2001. "PaulM. Moore" "Robert W. Korthals"