act section3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.c…ing...
TRANSCRIPT
-
l
. 0
U
PAUL J, CHASE , 3JOHN LOOAN O'DONNELLHARRY F WKYHERLEO P. ARNABOLDI. JR.WM F SONDERICKERJAMES C. TOLANROGER MULVIHILL
JOHN F WALSH. JR.LEONARD J CONNOLLYEDWARD A VROOMAN
JA-MES B. KCANEYE. SHEARELL ANDACWS
JOHH A. MCFARLANDVICTOM A MACMCINSKI. JA.MARTIN J. DEVER, JR.
THOMAS MANICK
ANDPEW J COSENTIHO
GLENN J POOUSTPAUL OLUCK
WILLIAM M. 00005
BRAOLCY H. STEIN
BRUCE 8 W,00
BARBARA J. KELLY
ANGELO 0 SAVINO
SCOTT LANGLEYAIC;IARD A. GOLDMAN
ALAN T OALLANTY
DENNIS P. SPATES
ROY B. LARSON
8 3
OLWINE, CONNELLY, CHASE, O'DONNELL & WEYH
000077
CHARLES H. MCCAOHEYWILLIAM F DOWNEY
JAMES C. HANSEN
STEPHEN A. MAOIDA
HIRAM KNOTT
PETER ARON
MICHAEL E, TWOMEY
RONALD N JEWELL
GAMY HOPPE
MICHAEL L SPAFFORD
KEVIN J. LAKE
COWARD A. SMITH
ANNEMARIE O DICOLA
NANCY PRAHOrER
CLAUDIA. BAUM
JOSEPH C TORTORICI
LIZABETH A. VEVURKA
DEREK CP MACKENZIECORNELIUS M COUR™EYCHARLES 8. FRIEDMANTERRENCE M BENNETT
WILLIAM A KAPELLROONEY M ZERIC405 0 SAMIOS
PAUL 1 RACHLINKENNETH B WEINER
NORA C .c CARDENAS
Gentlemen:
299 PARKAVENUE, NEW YORK, N. Y. 10171
212207·1800 .TELECOPIER: 753·2742
753 1747
AAP:FAX. 088·6120
CABLE ADOMESS OLCONCH
TELEX·,WX NUMBER,
TWI OCCOW HYK
710 SIt·6170
I: 0 9'·1:CH 0 42":·,1, e5 OW :litoN FINANCE
SEP 2 R1887-
September 16, 1987
PUBLIC AVAILABILITY DATE: 11-20-87ACT SECTION RULE
1934 16(b) 16b- 3
REOD S.E.(1fr ly M
SEP1 71987
29JJOHN E. CONNELLY, JR.
ROBERT H. GROGAN
RENATO C OIALLOFWINZI
FRANK W. GAINES, JR.'COUNSIL
WASHINGTON OFFICE
ROBERT LHOCCLE'
TIMOTHY J. rITZJIBBON
ROXANNE S. CLEMENTS
SUITE Bec
1850 K STRCCT. N W.
WASHINGTON. O. C 20006
(202) 659·4871
.NOTADMIT.EO IN
NE..0.K
WRITERS DIRECT LINE
1845(212) 207·
Section 16(b); Rule 16b-3
Supplement to Anitec Image Technology Corp.Request for No Action Advice regarding ,
Incentive Stock Option Plan
This letter supplements and amends our priorletter submitted on behalf of Anitec Image Technology Corp.,a Delaware corporation (the "Company"), dated July 27, 1987,in which we requested your concurrence with certain inter-pretations expressed therein of Rule 16b-3 promulgated underthe Securities and Exchange Act of 1934 (the "1934 Act") asthey relate to proposed amendments to the Company's Incen-tive Stock Option Plan (the "Plan").
Based on your advice, we have revised the proposedamendments to the Company's Plan to require that an optionholder's election to deliver already-owned stock, or to havethe Company withhold shares, upon exercise of a non-qualified option to satisfy the related tax obligation mustbe made either during the ten-day "window period" set forthin Rule 16b-3 (e)(3)(ili) or at least six months prior tothe-date that the option exercise becomes taxable. A copyof the proposed amendments to the Company's Plan, asrevised, is attached hereto as Exhibit A.
Our request for your- concurrence in the analysisand conclusion expressed in our July 27 letter relating tonon-"window period" elections to use the tax withholdingfeature is hereby withdrawn.
.E
mE
V
-
..t,
p
A
, 9
*:
'
b: 'f . . iP.- 0 34. 11 - \
j 1
....
5-
#;f
T.2 -
- „ We are still respectfully requesting that th*staff.concur in our conclusions expressed in the July 27letter as they relate to the proposed amendments to the yPlan, as revised and set forth on Exhibit A attached hereto,that, (1) the election by an optionee under -the Plan to' havea portion of the shares of common stock of the Companyotherwise issuable to the optionee withheld to satisfy_federal, state, and local tax withholding requirements willbe exempt from the operation of Section 16(b) of the 1934Act by reason of Rule 16b-3; (2) the election by an optioneeunder the Plan to deliver shares of common stock of theCompany, other than those received upon the relatedexercise, to satisfy federal, state, and local tax withhold-ing requirements will similarly be exempt; and (3) theseelecti'ons will.qualify for exemption by reason of Rule 16b-3even if the proposed amendments as revised by this letterare not submitted to the Company's shareholders forapproval.
Should you have any questions or comments aboutthis supplemental letter, please call'the undersigned, or,in his"absence, Stephen A. Magida-at (212) 207-1835.
.
. . 571
1,
000078
, (c Stp=*y,
Paul I. Rachlin
The Securities and Exchange Commission,Office of Chief Counsel,
Division of Corporate Finance,450 Fifth Street, N.W.,
Washington, D.C. 20549.
Attention: Mike Prozan, Esq.
FEDERAL EXPRESS
-
ii
wl m
PAUL J. CHASE
JOHN LOGAN O'DONNELLHAARY F. WEYHER
LEO P ARHAB-01. JR.WM. F SONDERICKER
JANISE. TOLAM
ROGER MULVIHILL
JOHN r WALSH. JR.
LEONARD J. CONNOLLYEDWARD A. VROOMAN
JAHES S. MIANCY
2. SHERRELL ANDREWS
JOHN A. MCFAMUHO
VICTOR A HACHCINSKI, JR.
MARTIN J DEVER. JR.
THOMAS MANICK
ANDREW J. COSCUTIHO
GLENN J. POOUST
PAUL GLUCK
WILLIAM K. 00000BRADLEY H. STEINBRUCC O *000
BARBARA J KELLY
ANGELO 0. SAVINO
SCOTT LANGLEYRICHARD A. OOLOMAN
ALAN T GALLANTY
DENNIS P. SPATES
ROY 8 LARSON
Alt ' '
' 6 .C.0.7f,\11· 01-WINE, CONNELLY, CHASE. O'DONNELL &
209 PARK AVENUE, NEW YORK, N. Y. 10171
CHARLES M McCAOHEY
WILLIAM r OOWNZY
JAMES C HANSEN
STEPHEN A MAGIDA
HIRAM KNOTT
PETER ARON
MICHAEL K. TWOMEY
RONALD R. JEWELL
OARY HOPPE
MICHAEL L. SPAFFORD
KEVIH J. LAKE
COWARO A SMITH
ANNEMARIE 0.0,COLANANCY PMAHOFER
CLAUDE A BAUM
JOSEPH C. TORTORIC:
LIZABETH A VEVURICA
DEREK O P MAC KENZIE
CORNELIUS M. COURTNEY
CHARLES 8. FRIEDMAN
TERRENCE M BENNETT
WILLIAM A. KAPELL
ROONCY M. ZERBE
GUS 0 SAMIOS
PAUL I AACHLIN
KENNETH 8 WEINER
NOMA C CE CARDENAS
Gentlemen:
212207·1800
TE'ECOPIER 753·2742
753·2747
RAP'FAX: 688 61,6
CABLE ADDRESS' OLCONCH
TELEX•n¥X NUMBER.
TWX OCCOW HYK
710 Sol·6170
im. 000079L- /1567
811 8 5 1987=.54%10.00*P*ELLY. JR.RENATO C CALLORCHZIFRANK W qAINES. JIM.OFFICE OF CHIEF :01jNSEL COU41%6 - .. CORPORATION FINA:r-
-.-- «41$4,ON OFFICEROOERT'L. HOEGLE'
July 27, 1987
TIMOTHY J. FITZOIBBON'
ROXANNE 5. CLEMENTS.
SUITE 890
1850 K STACIT, N W.
WASHINGTON. D. C. 20006
(2021 6594071
NOT AO.ITTED IN
.CW .0.M
WRITER'S DIRECT LINE
1835(212) 207*
Section 16(b); Rule 16b-3
Anitec Image Technology Corp.Request for No Action Advice Regarding
Incentive Stock Option Plan
On behalf of Anitec Image Technology Corp., aDelaware corporation (the "Company"), we are writing torequest your concurrence with the interpretations of Rule16b-3 promulgated under the Securities Exchange Act of 1934(the "1934 Act") expressed in this letter as they relate toproposed amendments to the Company's Incentive Stock OptionPlan.
THE COMPANY
The Company designs, manufactures and marketsphotographic films, papers and processing chemicals for the
' graphic arts industry. The Companys common stock isregistered under Section 12(g) of the 1934 Act and is quotedon NASDAQ. The Company has timely filed all reports andstatements required to be filed under the 1934 Act.
THE PLAN
In April 1985, the Company's Board of Directorsadopted the Incentive Stock Option Plan (the "Plan"). TheCompany's stockholders approved the adoption of the Plan
1 ..1,1 .,
„,1, gm '1 1111 11' „ 1 , , Trp 1 7 1,11 , " "1 1" 1"ll 1101 "' M /111 , ,"111 7/ 11., 111 1,111" , ./' p . '"/1' 111' • ' '1
.
-
2
000080
shortly thereafter. The Plan provides for the grant ofincentive stock options and non-qualified stock options tokey employees of the Company and its subsidiaries. Thepurpose of the Plan is to establish a close identity ofinterests between the Company and its subsidiaries and theirrespective employees, and to assist the Company in retainingthese employees and attracting new executives and other keyemployees.
For your reference, a copy of the Plan is attachedas Exhibit A to this letter. We would like to draw yourattention to Section 19 of the Plan which enables an optionholder to deliver shares of the Company's common stock tosatisfy, in whole or in part, the exercise price of anyoption granted under the Plan. For purposes of this letter,you may assume that the Plan in its present form complieswith the applicable provisions of Rule 16b-3.
THE PROPOSED AMENDMENTS
Anitec is proposing to amend the Plan to allowoption holders to satisfy tax withholding obligations inconnection with the exerci 3e of a non-qualified stock optionby having the Company withhold a number of shares deliver-able on exercise or by tendering to the Company a number ofalready-owned shares which have a value equal to thewithholding amount. A copy of the proposed amendments isattached as Exhibit B to this letter.
Unlike prior similar plan amendments considered bythe Staff (see discussion below), the Plan, as amended, willnot require that an option holder's election to deliveralready-owned stock, or to have the Company withhold shares,upon exercise of a non-qualified option to satisfy therelated tax obligation must be made either during the ten-day "window period" set forth in Rule 16b-3(e)(3)(ili) or atleast six months prior to the date that the option exercisebecomes taxable. However, the exercise of a non-qualifiedstock option within six months of its date of grant will beprohibited.
The Compensation Committee of the Board ofDirectors, which administers the Plan and all of whose mem-bers are "disinterested persons" within the meaning of Rule16b-3(b)(3), will reserve the absolute right to disapproveany election to deliver already-owned stock, or to withholdstock, to satisfy the optionee's tax obligation.
,
WE-
-
1.,
,
DISCUSSION
1. Share Withholding Election
3
000081
Under the Plan as proposed to be amended, aparticipant will have the discretion to elect to satisfy taxwithholding obligations by using shares of common stockalready owned or issuable on an option exercise. We realizethat en argument might be made that this discretion isequivalent to the right to receive, to a certain extent,either stock gr a cash equivalent (taxes paid) on exerciseof an option and that using stock to satisfy tax withholdingobligations arguably resembles a cash settlement of a stockappreciation right, which in turn must comply with Rule 16b-3(e). However, we believe that the proposed amendments aremore like the surrender of stock as payment for an optionexercise, herein referred to as a stock-for-stock optionexercise, than a cash settlement of an SAR, and shouldtherefore be analyzed in that context. Nevertheless, theproposed amendments to the Plan will satisfy most of therequirements of Rule 16b-3(e).
The staff has previously taken the position that,so long as certain of the requirements of Rule 16b-3(e) aremet, that Rule exempts from the operation of Section 16(b)of the 1934 Act the election by a Plan participant to have aportion of the shares otherwise issuable to that parcicipantwithheld to satisfy tax withholding requirements. PrimarkCorporation, (February 23, 1987); Baxter TravenolLaboratories, Inc., (February 10, 1986). In the letterscited, the staff relied upon Rule 16b-3(e), which exemptscertain cash settlements of SARs.
With respect to SARs, however, Rule 16b-3(e)requires that the election to receive a cash payment uponexercise of the SAR and the actual exercise of the SAR,occur during a ten-day "window" period as defined in Rule16b-3(e)(3)(iii). The proposed amendments to the Plan allowoption holders to elect to use stock to pay tax withholdingobligations outside any window period and without a six-month prior election. The staff has expressed the view inprior interpretative letters that, so long as the electionto deliver already-owned stock or to have shares of stockwithheld to pay the participant's tax liability is madewithin either of the aforementioned time periods, the actualexercise of the option need not occur during a windowperiod. Baxter Travenol Laboratories, Inc. (February 10,1986); Eli Lilly & Co. (July 23, 1986).
-
-
e
51
4
000082
We submit that such timing restrictions on the useof stock to satisfy tax withholding obligations areinconsistent with the need for flexibility in the area oftax withholding and are unnecessary to further the -underlying purposes of Rule 10-3. The timing restrictionson the use of the 3tock withholding feature derive from itsanalogy to SARs. In certain respects, however, the use ofstock to satisfy tax withholding obligations bears a closerresemblance to a stock-for-stock option exercise. Notably,Rule 16b-3 does not require a prior election by optionholders for stock-for-stock option exercises.
Under Rule 16b-3 the "surrender or delivery to theissuer of its stock as payment upon the exercise of a stockoption" is not considered a "sale" of stock. From theperspective of the employee option holder, the paymentrequired upon exercising an option is the sum of the optionprice and the tax required to be withheld on exercise. Webelieve that the word "payment" in Rule 16b-3's stock-for-stock exercise exemption should encompass the taxwithholding obligations which arise on exercise of theoption. In Primark, see above, for example, the Staffconcluded that the use of already-owned stock to satisfy taxwithholding obligations was not a "sale" of stock underSection 16(b). The Staff's conclusion is entirely consistentwith the proposition that the delivery of stock to satisfytax withholding obligations is analogous to the surrender ofstock in payment of the option price, which under Rule 16b-3is not a "sale" of stock.
Since Rule 16b-3 does not require option holdersto make an election to use stock as payment of the optionprice during a window period or at least six months prior toexercise, the Rule should not be construed to impose suchrestrictions on an election to use stock to pay the taxwithholding obligation. Furthermore, we believe that theelimination of such timing restrictions, consistent with thetreatment of stock-for-stock option exercises, creates nosignificant opportunity for speculative abuse, and isconsistent with the need for flexibility in the area of taxwithholding.
Although we believe that the use of stock tosatisfy tax withholding obligations in connection withoption exercises should not be rigidly cast by analogy as acash settlement of an SAR, the Plan, as amended, Willcomply with most of the requirements of Rule 16-b(3)(e). Asnoted above, the Company's common stock is registered underSection 12(g) of the 1934 Act and the Company has been
-
T
-
5
000083
subject to the reporting requiremen1s of Section 13 of the1934 Act for more than a year and has filed all reports andstatements required to be filed pursuant to that Section.Accordingly, the requirements of subparagraph (1) of Rule16b-3(e) are satisfied. The requirements of subparagraph(2) of Rule 16b-3(e) are satisfied because the exercise of anon-qualified stock option may not occur until at least sixmonths after the date of grant of the option (except thatthe limitation may not apply in the event death ordisability of the participant occurs prior to the expirationof the six-month period).
With respect to the requirements of Rule 16b-3(e)(3)(i), all members of the Compensation Committee, whichadministers the Plan, are "disinterested persons". ThatCommittee will approve, in advance, the election to withholdshares, or to deliver already owned shares, to satisfy theoptionee's tax obligation with respect to all outstandingand subsequently granted non-qualified stock options, sub-ject to the Committee's right to disapprove any election andto revoke its advance approval. The Committee's actionmeets the requirements of Rule 16b-3(e)(3)(ii) because theCommittee has both the power to consent to and disapproveany such election. -
2. Shareholder Approval
Pursuant to paragraph (a)(2)(ii) of Rule 16b-3,for a plan to enjoy the exemptions provided by Rule 16b-3,any amendment to the plan must be approved by the share-holders of the Company if the amendment would:
(A) materially increase the benefits occurring toparticipants under the plan;
(B) materially increase the number of securitieswhich may be issued under the plan; or
(C) materially modify the requirements as toeligibility for participation in the plan.
The proposed amendments do not increase the numberof securities which may be issued under the Plan or modifythe requirements as to eligibility for participation in thePlan. The Company also does not believe that such amend-ments materially increase the benefits occurring to partici-pants under the Plan.
-
ilr
a, \,
-
V
."
7
000085
taxable; and (4) these elections will qualify for exemptionby reason of Rule 16b-3 even if the proposed amendments arenot submitted to the Company' s shareholders for approval.
Should you require any additional information,-orwish to discuss the matter further, please do not hesitateto contact the undersigned, or in his absence, Paul Rachlinat (212) 207-1845.
Securities and Exchange Commission,Office of Chief Counsel,
Division of Corporate Finance,450 Fifth Street, N.W.;
Washington, D.C. 20549.
Attention: William E. Toomey, Esq.
1.
" PIll M 1 ' lili'I 11 'llr I lillill, 11/1, 9, 1,1'1
Very truly yours,
3*5 8. 04£Stephen A. Magida
1 . '. I Ir ., 1 i,1 P
-
- -- Ill
-
, October 20, 1987
RESPONSE OF THE OFFICE OF CHIEF COUNSELDIVISION OF CORPORATION FINANCE
000086
Re: Anitec Image Technology Corp.Incoming letters dated July 27 and September 16, 1987
On the basis of tha facts presented, it is the view of thisDivision that a) the election by an optionee under the Plan tohave a portion of the shares of common stock of the Companyotherwise issuable to the optionee withheld to satisfy federal,state and local tax withholding requirements will be exempt fromthe operation of Section 16(b) of the Securities Exchange Actof 1934 by reason of Rule 16b-3; b) the election by an optioneeunder the Plan to deliver shares of common stock· of the Company,other than those received upon the related exercise, to satisfyfederal, state and local tax withholding requirements will besimilarly exempt; and c) the proposed amendments providing forthese elections need not be approved by shareholders pursuantto Rule 16b-3(a).
Because these positions are based upon the representationsmade to the Division in your letter, it should be noted that anydifferent facts or conditions might require a different conclusion.
- 1 111 ' 1111 1, I ' , " 4.-/.--=:- 'll,
Sincerely, ,
6239*-William E. ToomeyAssistant Chief Counsel
, 'El" I,[, I' ," 1/ ?11 .1 111 1/