Questions Posed for Today's Webcast

Alan Dye on the Latest Section 16 Developments

Tuesday, February 3, 2000

Mandatory Distributions from 401(k) Plan

1. One of our officers retired last year but remains on the board as a director. He has reached the age where, under IRS rules, he must begin taking minimum distributions from his 401(k) plan. If the plan trustee sells company stock from the director's account to fund distributions, will the sales be reportable? If so, should the sales be reported on Form 4 or Form 5, and using what transaction code?

Combined Form 4/Form 144

2. Is there any truth to the rumor that the SEC may combine Form 4 and Form 144? If so, what is the expected timing of the proposal? When would the form be due, and would Form 4 (without Form 144) still be available for reporting purchases?

Reporting Total Holdings of Options in Table 9 of Table II

3. (a) When reporting a stock option exercise in Table II for an insider who holds numerous stock options granted at varying exercise prices, what figure is supposed to be shown in Column 9 of Table II--the number of options still outstanding for the option that was exercised, or the total number of shares underlying all of the insider's options?
   (b) What should be done now if the company hasn't been following that practice?

Counting Two Business Days

4. Every February our compensation committee (comprised of non-employee directors) approves grants of equity awards to executive officers.  This year our board meetings will be held in Europe, and as a result of the different schedule, the compensation committee will meet on a Sunday, which will be the date of grant for our equity awards.   Since the grant date will be a non-business day, what is the deadline for filing the Forms 4 to report the equity awards?

   Partnership as Reporting Person

5. When a limited partnership owns more than ten percent of an issuer's stock, who should be named as a filing person in the Form 3 and other Section 16 filings, the partnership or its general partner? The general partner of the partnership is a limited liability company.

   New Edition of Section 16 Forms and Filings Handbook

6. I hear that you're updating the Section 16 Forms and Filings Handbook. When will the new edition be out?

   Reporting Securities Acquired in Exempt Transactions

7. We had a couple of officers retire early in 2008. We had reported all transactions by those insiders that were required to be reported, but we had not filed a Form 4 that included an update of their total holdings under the company's employee stock purchase plan and 401(k) plan, to reflect acquisitions during the early part of the year. We will be filing Forms 5 for all of our current insiders, and those reports will show each insider's holdings under the qualified plans. Should we also file Forms 5 for the two retired officers?

   Late Form 4 by Former Insider

8. Our chief financial officer retired effective December 31, 2008, the last day of our fiscal year, and earlier that day he sold company stock from his 401(k) plan account. The deadline for filing the Form 4 was January 5, but the form wasn't filed until January 6. Given that the late filing occurred in 2009, and the former CFO will not be an officer at any time during 2009, is the late filing ever disclosable under Item 405?

   Exceeding 30 Lines of Reportable Transactions or Holdings

9. We are filing a Form 3 for a new officer and need more than 30 lines of Table II to report her holdings of derivative securities. The instructions to the form say we can report additional holdings in the footnote area of the form. How should the information be presented?

Specific Approval of Tax Withholding Upon Exercise of Option

10. Our stock option plan provides that an optionee may elect to satisfy tax withholding obligations that arise upon exercise of an option by having the company withhold option shares equal in value to the amount of the tax, subject to the company's ability to disallow stock withholding in its discretion. All options held by insiders were approved by a committee of two or more non-employee directors. If an insider elects tax withholding, will the resulting disposition of shares be exempt under Rule 16b-3(e)?

    Aggregate Reporting

11. If an insider's broker executes the insider's sell order in a series of transactions at different prices, but shows only a weighted average price in the confirmation provided to the insider, is it okay to report the transaction on Form 4 as a single trade at the weighted average price?

Application of Rule 16b-3 to Former Officer's Transactions with Issuer

12. Our stock option plan provides that, if an optionee terminates service, the option may be exercised, to the extent that it was vested on the date of termination, at any time during the three months following termination. The plan also permits optionees to pay the exercise price and related taxes by delivering already owned shares of company stock. All options under the plan were approved by our compensation committee, which is comprised solely of non-employee directors. If a Section 16 officer terminates service and then delivers stock to pay the exercise price of an option and applicable taxes, will the delivery of stock be exempt under Rule 16b-3(e)?

    Plan Administrator's Sale of Vested RSU Stock to Pay Tax Withholding

13. We have issued to our Section 16 executives restricted stock units that cliff vest in three years. Our plan documents require the plan administrator to "sell to cover" taxes due upon vesting, and to deliver to the executive the net number of shares. Is the plan administrator's sale of shares a reportable event for the insider, where the shares were never held by or issued to the insider?

UGMA Custodian's Transfer of Shares to Child

14. We have just discovered that shares of common stock held by a custodian on behalf of an insider's child in college were transferred to the child in 2007. All Forms 4 filed since then have reported the UGMA shares, but instead of reporting them as owned "indirectly by child," the Forms 4 reported them as owned "indirectly by custodian for child." Do we need to go back and amend any or all of the filings, or can we just update the nature of the holding on the insider's next Form 4?

    Cash-Settled Total Return Swaps

15. In view of the decision last summer in CSX v. The Childrens' Investment Fund, do you think holders of cash-settled total return swaps should consider themselves beneficial owners of the shares underlying the swaps for the purpose of determining their status as ten percent owners?

    Attorney's Fee For Bringing Short-Swing Transaction to Issuer's Attention

16. How much should we pay a plaintiff's lawyer for bringing to our attention a short-swing profit realized by one of our insiders? The insider sold stock less than six months after a purchase, and we did not catch the Section 16(b) violation. When the plaintiff's attorney sent a letter demanding that the profit be recovered, we got in touch with the insider and he paid it right away.

    Voluntary Reporting on Form 4

17. Do you think it's better to report gifts and other exempt transactions on Form 5, or earlier on a voluntary Form 4?

Issuer's Suspension of Dividend Reinvestment Plan

18. If a dividend reinvestment plan is temporarily suspended, would the Rule 16a-11 reporting exemption still be available for dividend equivalent rights on deferred compensation stock units?

    Change in Fiscal Year

19. If an issuer has changed its fiscal year end from March 31 to December 31, so that its most recent fiscal year began on April 1 and ended on December 31, would the relevant period for Form 5 purposes be April 1 to December 31? That is to say, transactions from the prior January to March 31 -- which were already captured on the past year's Form 5 – would not need to be recaptured, correct?

    Checking the Item 405 Box on Cover of Form 10-K

20. When we filed our Form 10-K, we checked the Item 405 box indicating that there would be no disclosure of delinquent filers in the 10-K or proxy statement. We checked the box based on our Section 16 compliance procedures, including a certification by insiders that no Forms 5 would be due. Unfortunately, when preparing the proxy, we discovered that one of our insiders had engaged in a transaction that was not reported. Accordingly, we plan to disclose a delinquency in the proxy statement. Do we need to amend our Form 10-K to uncheck the box regarding Item 405 disclosure?

    Effective Date of Insider Status

21. If a new director is appointed to the board by a resolution of the board of directors adopted in December of 2008, with the appointment to become effective on January 1, 2009, when does a Form 3 need to be filed? Ten days after January 1, 2009, or ten days after appointment in December 2008?

    Filing Date Adjustment

22. We filed a Form 4 one day late. The reason for being late is that the person making the filing made a test filing rather than an actual filing. We didn't discover the mistake until the next morning. Is there any way to avoid treating the filing as late, so that we don't have to disclose the delinquency in the proxy statement?