Company Name: Gannett Co., Inc.
Public Availability Date: Dec. 5, 1980
INQUIRY LETTER
WILSON & McILVAINE
135 SOUTH LA SALLE STREET
CHICAGO, ILLINOIS 60603
(312) 263-1212
October 03, 1980
Mr. Peter J. Romeo
Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Re: Rule 144 Stock - Status of Non-Restricted Securities Donated by an Affiliate
or Distributed to an Income Beneficiary by an Affiliate Trust
Dear Mr. Romeo:
Our client, John J. Louis, Jr., is a director of Gannett Co., Inc. ("Gannett")
and, therefore, may be considered an affiliate of Gannett.
Mr. Louis directly owns 302,169
shares of common stock of Gannett and he is co-trustee of and has a current
income interest in and power of appointment over a trust which owns 79,339
shares. His wife and children living in their home own, directly or indirectly
through trusts in which they have a present income interest, 118,342 shares.
In addition, Mr. Louis is the
co-trustee or trustee of four trusts under which the primary beneficiaries are
relatives not in his household, being his adult brothers and one of his nephews.
These trustees hold an aggregate of 342,640 shares of common stock of Gannett.
In three of these trusts Mr. Louis has an extremely remote contingent remainder
interest which requires him to survive a number of his relatives who have longer
life expectancies. In two of these trusts, Mr. Louis is a member of a class to
whom the trustees may distribute income in their discretion but no income has
ever been distributed to him from such trusts.
With the exception of certain
subsequent gifts, all of the above shares of common stock of Gannett were
acquired by the present owner in June 1979 directly from Gannett in connection
with its acquisition of Combined Communications Corporation ("CCC"). The CCC
shares which were converted into the above Gannett shares in the acquisition had
been held by the present owners (or their donors) for a number of years. Such
acquisition was a Rule 145 transaction and Gannett registered the above shares
under the Securities Act of 1933 ("1933 Act"). Because Mr. Louis is an affiliate
of Gannett, resales of the above shares are governed by Rule 144 rather than
Rule 145.
The above shares of common
stock of Gannett owned by Mr. Louis and his family (and the trusts to the extent
they have an affiliate status) may be sold under Rule 144 without regard to the
two-year holding period requirement under Rule 144(d) because all of such shares
were registered under the 1933 Act.
Before year end the following
transactions involving the above shares of Gannett are contemplated:
(1) Mr. Louis may make gifts of
some of his shares;
(2) The trust of which he is
co-trustee and the current income beneficiary and the three trusts of which he
is trustee or co-trustee and remote contingent beneficiary desire to distribute
shares of Gannett to the present income beneficiaries.
Such transactions would involve
the transfer of unrestricted shares by an affiliate (assuming the trusts are
affiliates) in a non-public transaction. Release No. 33-6099 (Item 9) indicates
that such shares would become restricted in the hands of the donee or
beneficiary. The following question arises with such result and we request your
interpretive opinion with respect thereto:
Is the two-year holding period
of Rule 144(d) applicable to the donee or beneficiary who receives a gift or
distribution of unrestricted securities from an affiliate donor or trust?
In our opinion, the two-year
holding period requirement should not be imposed on the donee or beneficiary
because this would put him in a worse position than the affiliate who could have
sold such securities under Rule 144 without compliance with the holding period
requirement. For other purposes of Rule 144, Release No. 33-6099 clearly
indicates that the donee should be in no worse position than the donor. See Item
9 and Item 12. We also note that Rule 144 and Release No. 33-6099 provide that
gifts and non-sale transactions with a trust do not involve new investment
decisions and, therefore, do not require commencement of a new holding period.
See Rule 144(d)(4)(E) and (F) and Item 31 of Release No. 33-6099. Likewise, it
follows that such transactions should not impose a holding period requirement
where none existed for the affiliate.
We request your confirmation
that a donee or beneficiary need not comply with Rule 144(d) with respect to
sales of unrestricted securities which were donated to him by an affiliate or
distributed to him by a trust which is an affiliate.
Very truly yours,
WILSON & McILVAINE
By:
Anthony N. Graham
STAFF REPLY LETTER
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Gannett Co., Inc.
Incoming letter dated October 3, 1980
In your letter, you have requested the staffs view with respect to the
applicability of the two year holding period requirement of Rule 144(d) to
unrestricted securities owned by an affiliate which are transferred to a donee
or beneficiary in a non-public transaction resulting in those shares being
deemed restricted in the hands of the donee or beneficiary. On the basis of the
facts presented, it is this Divisions view that the two year holding period of
Rule 144(d) is not applicable to the sale of such securities by the donee or
beneficiary.
Because this position is based
upon representations made to the Division in your letter, it should be noted
that any different facts or conditions might require a different conclusion.
Sincerely,
Norman Schou
Special Counsel
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