0505001 Informal Interpretation

From: (redacted)
Sent: Wednesday, May 11, 2005 12:54 PM
To: Verne, B. Michael
Subject: FW: HSR Question

Mike-

Please see the explanation below. In addition, there is a discussion of T+3 onthe SEC web site at http://www.sec.gov/answers/tpIus3.htm

Let me know if you have any other questions.

-----Original Message ----
From: (redacted)

Sent: Wednesday, May 11, 2005 12:46 PM

To: (redacted)

Subject: RE: HSR Question

(redacted) --This is the definition from the "Glossary of Stock PlanTerms" found on the website for the National Association of Stock PlanProfessionals:

"T+3 - The settlement date for securities transactions such as a stocksale. T+3 refers to the obligation in the brokerage business to settle securitiestrades by the third day following the trade date. "Settlement" occurswhen the seller receives the sales price (less the broker's commission) and thebuyer receives the shares."

Basically, when a stock option is exercised in a cashless exercise, the brokeris obligated to settle the exercise and deliver the cash or shares within 3days after the exercise date. I hope that helps (redacted)

-----Original Message ----

From: Verne, B. Michael <MVERNE@ftc.gov>

To: (redacted)>

Sent: Tue May 10 14:48:20 2005

Subject: RE: HSR Question

(redacted) - what is the T+3 rule? Is this an SECrule? Do you have any additional info on it (a cite maybe)? Thanks

-----Original Message ----

From: (redacted)

Sent: Tuesday, May 10, 2005 7:52 AM

To: Verne, B. Michael

Subject: HSR Question

Mike-

The following is a link to an informal staff opinion that I found on the FTC'sweb site (in case you are not able to access it, the number for this opinion is0210009). http://www.ftc.gov/bc/hsr/informal/opinions/0210009.htm This opinionconcerned the "cashless" exercise of stock options. I have threequestions relating to this opinion.

First, does this opinion still represent the current opinion of the PremergerNotification Office?
(MV comment YES)

Second and assuming that it still represents the current opinion of the PNO, does the relatively new T+3 rules change the opinion? The factsin the opinion state that the stock is sold on the same day the shares areexercised. With T+3, up to 3 days are permitted for settlement. In other words,if the intent to make a "cashless" exercise remains, but the entire"cashless" transaction takes until the third day, does the PNO's opinion change? (MV comment NO)

Third and again assuming that the attached still represents the current opinionof the PNO, if a person makes a partial"cashless" exercise (for example, where sufficient shares areimmediately sold to cover the exercise price and taxes, but the remaining"net profit" shares are held), would the "cashless" portionbe disregarded consistent with the earlier opinion? In other words, would the"cashless" exercise portion be treated as though it did not occur,leaving only an analysis of the acquisition of the stock that is retained inthe exercise?

Thank you for your time and attention to these questions. If you would like todiscuss any of these questions with me, please do not hesitate to call me atthe number below. (MV comment YES)

Best regards,