Calculation of Aggregate Sales Price under Rule 701

[Guest StephenJ7976]

Does anyone know how the calculation of aggregate sales price under the registration exemption provided in Rule 701 applies with respect to phantom stock, phantom units, or restricted stock? Specifically, Rule 701(d)(3)(ii) provides:

“(ii) Time of the calculation. With respect to options to purchase securities, the aggregate sales price is determined when an option grant is made (without regard to when the option becomes exercisable). With respect to other securities, the calculation is made on the date of sale. With respect to deferred compensation or similar plans, the calculation is made when the irrevocable election to defer is made.”

However, when does the "date of sale" occur with repsect to the issuance of phantom stock, phantom units, or restricted stock?

[jpod]

Why would phantom stock, phantom units or restricted stock involve the "offer of a security" for which registration or an exemption is necessary?

[Guest StephenJ7976]

"Investment contracts" or instruments "commonly known as a security"?

[jpod]

Sorry, but I'm not following you. Is there an offer to sell restricted stock, phantom stock or phantom units? (I am assuming that there is no consideration changing hands, other than the employee's services.)

[Guest StephenJ7976]

No offer -- restricted stock, phantom stock and/ or phantom units are granted to employees under LTIP

[jpod]

Based on your response, I don't understand why you are trying to figure out how 701 should apply. You don't need to register anything or an exemption from registration.

[Steelerfan]

Based on your response, I don't understand why you are trying to figure out how 701 should apply. You don't need to register anything or an exemption from registration.

I think the SEC considers an interest in a NQDC plan to be a security, thus creating the need for registration or satisfaction of an exemption. As to how to value them, that is the big problem under 701, assuming that exemption is available. Restricted stock should not require an exemption as it is not NQDC.

[jpod]

The SEC staff would consider an interest in a NQDC Plan a security subject to registration only if it was elective. How is that pertinent to the facts stated by StephenJ7976?

[Steelerfan]

The SEC staff would consider an interest in a NQDC Plan a security subject to registration only if it was elective. How is that pertinent to the facts stated by StephenJ7976?

You're right about that, but public companies will normally file an S-8 and provide a prospectus supplement with grants of phantom units just in case. With these equity-flavored plans, are you 100% comfortable not complying with an exemption?

[jpod]

Yes, 100% comfortable. Do you have any S-8s for phantom stock plans handy which you can cite to us? Granted, there are S-8s out there covering omnibus plans that contain both registerable interests and non-registerable interests, but I would hardly characterize that as doing an S-8 for a free phantom stock plan "just in case."

[Steelerfan]

Yes, 100% comfortable. Do you have any S-8s for phantom stock plans handy which you can cite to us? Granted, there are S-8s out there covering omnibus plans that contain both registerable interests and non-registerable interests, but I would hardly characterize that as doing an S-8 for a free phantom stock plan "just in case."

Just the one for the company I work for and I don't want to disclose that here. It could be for the omnibus plan, but I don't think so, because the prospectus supplements relate only to the grants of units, which are separate agreements. Maybe they're being overly cautious or could it be that the executive is a proxy officer, and that's why?

[Guest Exec_Ben_N_Ret_Med_Guru]

Yes, 100% comfortable. Do you have any S-8s for phantom stock plans handy which you can cite to us? Granted, there are S-8s out there covering omnibus plans that contain both registerable interests and non-registerable interests, but I would hardly characterize that as doing an S-8 for a free phantom stock plan "just in case."

Just the one for the company I work for and I don't want to disclose that here. It could be for the omnibus plan, but I don't think so, because the prospectus supplements relate only to the grants of units, which are separate agreements. Maybe they're being overly cautious or could it be that the executive is a proxy officer, and that's why?

Or is there some voluntary deferral in the construction of the plan?

[Steelerfan]

I think jpod was right, it's for an omnibus plan of a public co. and there is an S-8 already out there. Maybe there's more of a question if the company isn't public, I don't know.