Paul A. Tanner, Sr. and Beverly N. Tanner - Page 11




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               months, unless such security was acquired in good faith                
               in connection with a debt previously contracted, shall                 
               inure to and be recoverable by the issuer, irrespective                
               of any intention on the part of such beneficial owner,                 
               director, or officer in entering into such transaction                 
               of holding the security purchased or of not                            
               repurchasing the security sold for a period exceeding                  
               six months. * * *                                                      
          15 U.S.C. sec. 78p(b).  The purpose of the section is to                    
          eliminate trading on insider information and eliminate conditions           
          that would give rise to possibilities for such trading.  Keller             
          Indus. v. Walden, 462 F.2d 388, 389 n.4 (5th Cir. 1972).                    
               4.   When Does the 6-month Restricted Period Under Section             
                    16(b) Begin To Run?                                               
               We find that the 6-month restricted period under section               
          16(b) commences on the date of grant.  In 1991, the Securities              
          and Exchange Commission adopted amendments to the section 16(b)             
          rules to clarify how the section applies to derivative                      
          securities, including options.6  Magma Power Co. v. Dow Chem.               
          Co., 136 F.3d 316, 321 (2d Cir. 1998).  The amendments recognized           
          that holding options is “functionally equivalent” to holding the            
          underlying equity securities for section 16(b) purposes because             
          the value of the option is related to the value of the underlying           
          security.  Final rules and solicitation of comments:  Ownership             


               6  A “derivative security” is defined to include options               
          with a fixed exercise price, like the one in issue.  Final rules            
          and solicitation of comments:  Ownership Reports and Trading by             
          Officers, Directors and Principal Security Holders, 56 Fed. Reg.            
          7242, 7252 (Feb. 21, 1991).                                                 






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