Foster Pepper & Shefelman
Dec. 20, 1991

INQUIRY LETTER 1

FOSTER PEPPER & SHEFELMAN

1111 THIRD AVENUE, SUITE 3400

SEATTLE, WASHINGTON 98101

TELEPHONE (206) 447-4400

May 28, 1991

Office of Chief Counsel

Division of Corporation Finance

Securities & Exchange Commission

450 Fifth Street N.W.

Washington, D.C. 20549

Dear Sir or Madam:

Interpretative Advice With Respect to Amended Section 16 Rules

In accordance with conversations with the Staff of the Division of Corporation Finance, the following interpretative question is submitted with respect to the recently adopted amendments to the Commissions rules under Section 16 of the Securities Exchange Act of 1934.

Rule 16(b)-3(c)(1) provides that in order for a grant of an equity security, including a derivative security, to be exempt from Section 16(b), a total of six months must elapse between the grant of the derivative security. If a former employee received the grant of a stock option more than six months before the date of a proposed sale, but in connection with the termination of the employment relationship the Plan Administrator agreed to accelerate the vesting provisions of the stock option, does the change of the vesting period create a "new" derivative security which must be held for six months from the date the vesting provisions are changed? The acceleration of the vesting period was done in accordance with the existing Plan.

Thank you for your assistance in connection with this inquiry.

Sincerely,

Robert J. Diercks

INQUIRY LETTER 2

FOSTER PEPPER & SHEFELMAN

1111 THIRD AVENUE, SUITE 3400

SEATTLE, WASHINGTON 98101

TELEPHONE(206) 447-4400

August 02, 1991

VIA FACSIMILE

202-272-2677

Mr. Brian J. Lane

Office of Chief Counsel

Division of Corporation Finance

Securities & Exchange Commission

450 Fifth Street N.W.

Washington, D.C. 20549

Dear Mr. Lane:

In accordance with our telephone conversation last week, this will supplement our letter of May 28, 1991 requesting an interpretation of the Commissions Rule 16(b)-3(c)(1) in connection with the acceleration of the vesting period for a derivative security. You have requested further information regarding the acceleration of the vesting period under the stock option plan.

As we previously noted, the Plan Administrator agreed to accelerate the vesting provisions for an employee in connection with the termination of the employment relationship of the employee. The provisions of the Stock Option Plan which are relevant are as follows:

a. Plan Administration. The Plan Administrator is the Board of Directors or a committee of the Board of Directors, in either case, consisting of a majority of disinterested directors. The Plan Administrator has the authority, in its discretion, to determine all matters relating to the derivative securities.

b. Term and Maturity. The Plan provides that the term of each non-qualified stock option shall be as established by the Plan Administrator. The Plan then provides that "unless the condition of this sentence is waived or modified in the agreement evidencing the option or by resolution adopted by the Plan Administrator" the option will be exercisable 20% after one year continuous relationship with the company from the date the option was granted and an additional 1.666% each month completed thereafter.

c. Termination of Relationship. The Plan provides that if an employees relationship with the Company ceases, the employee may exercise that portion of the option "which is exercisable at the time of such cessation". The option shall terminate at the end of a three month period unless "such provision is waived in the agreement evidencing the option or by resolution adopted by the Plan Administrator within 30 days of such cessation".

The actual option issued to the ex-employee incorporates the Plan and states that the option "shall vest and become exercisable according to the terms and conditions of the (Plan) and as follows:" and repeats the normal vesting schedule set forth in the Plan under Term and Maturity.

As our letter of May 28, 1991 noted, in connection with the termination of the employment relationship, the acceleration of the vesting period for a certain number of options was done by a unanimous resolution of the Board of Directors and consequently was made in accordance with the Plan. The corporate resolution provided that "the stock option grants for (employee) shall be accelerated to allow for the immediate vesting of (additional) options". We do not believe that this acceleration of the options vested by a resolution of the Plan Administrator in accordance with the Plan constitutes a new grant of the derivative security. We would appreciate receiving confirmation from the staff in this regard.

Please call the undersigned if you need any further information.

Very truly yours,

Robert J. Diercks

STAFF REPLY LETTER

December 20, 1991

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF CORPORATION FINANCE

Re: Foster Pepper & Shefelman

Incoming Letters Dated May 28, 1991 and August 2, 1991

Upon reconsideration of the Divisions letter to you dated August 30, 1991, the Division will not view the discretionary acceleration by the plan administrator of the vesting period or exercisability of a stock option or other security as a cancellation of the existing security and the grant of a new security, for purposes of Rule 16b-3(c)(1). It should be noted, or other security, other than the acceleration of vesting or exercisability, may be deemed to be cancellation of the old security and grant of a new security. See, e.g., Release No. 34-29131 (April 26, 1991) n. 35.

Sincerely,

Brian J. Lane

Special Counsel