Nield and Linda Montgomery - Page 29

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          sec. 240.16b-6(a) and (b) (2006), which apply specifically to               
          derivative securities.  Read together, these regulations provide            
          that (1) the establishment of a call equivalent position (grant             
          of a stock option) shall be deemed a purchase of the underlying             
          security for purposes of section 16(b) of the Exchange Act, (2)             
          the acquisition of underlying securities at a fixed price upon              
          the exercise of a call equivalent position shall be exempt from             
          the operation of section 16(b) of the Exchange Act, and (3) if 6            
          months elapse between the acquisition of a derivative security              
          and the disposition of the derivative security or its underlying            
          equity security, the transaction is exempt from the operation of            
          section 16(b) of the Exchange Act.  Inasmuch as petitioner did              
          not sell any MGC shares within 6 months of March 1999--the last             
          date MGC granted petitioner an ISO--we conclude petitioner                  
          qualified for the exemption set forth in SEC rule 16b-3(d)(3).              
          Consequently, we hold petitioner was not subject to a suit under            
          section 16(b) of the Exchange Act during 2000.                              
               We would reach the same conclusion even if some technical              
          impediment precluded petitioner’s ISOs from qualifying for                  
          exemption under SEC rule 16b.  That rule merely provides                    
          exemptions or a “safe-harbor” from the applicability of section             
          16(b) of the Exchange Act--it does not impose affirmative                   
          liability.  As previously discussed, because petitioner’s ISOs              
          were granted between April 1996 and March 1999, the 6-month                 






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