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Technology Stocks : Phoenix Technologies (PTEC) -- Ignore unavailable to you. Want to Upgrade?

To: Fred Fahmy who wrote (2915)	11/22/1998 9:59:00 AM
From: Mark Brophy	Respond to of 3624

POI rules are more complicated. There are not only restrictions on repurchasing shares within 180 days after a merger, but also in the 2 years prior to a merger. Phoenix can retire 10% of their shares plus the shares necessary to meet their warrant obligations to Intel and still qualify acquisitions as POI. APB Opinion 16 governs the accounting of POI and states the conditions that must be met at geocities.com. Treasury-Stock Condition. Each of the combining enterprises reacquires shares of voting common stock only for purposes other than business combinations, and no enterprise reacquires more than a normal number of shares between the dates the plan of combination is initiated and consummated….Each of the combining enterprises reacquires shares of voting common stock only for purposes other than business combinations, and no enterprise reacquires more than a normal number of shares between the dates the plan of combination is initiated and consummated. (1) Treasury stock acquired for purposes other than business combinations includes shares for stock option and compensation plans and other recurring distributions provided a systematic pattern of reacquisitions is established at least two years before the plan of combination is initiated. A systematic pattern of reacquisitions may be established for less than two years if it coincides with the adoption of a new stock option or compensation plan. The normal number of shares of voting common stock reacquired is determined by the pattern of reacquisitions of stock before the plan of combination is initiated. … Purpose of Treasury-Stock Condition. As discussed in paragraph 1.02 of this manual, a pooling-of-interests business combination is a uniting of ownership interests through an exchange of equity interests that is accomplished without disbursing resources of the combining enterprises. The concept of pooling-of-interests would not be met if an enterprise disburses cash or other resources to acquire treasury shares that subsequently are issued to effect a business combination. Accordingly, the treasury-stock condition precludes pooling-of-interests accounting when the combining enterprises reacquire shares of their voting common stock for purposes of effecting the combination. Violation of the treasury-stock condition precludes the use of pooling-of-interests accounting for a combination without regard to whether treasury shares, previously unissued shares, or both are issued to effect the combination. (CT B50.564) Tainted Treasury Stock. Treasury stock acquired by the combining enterprises within two years of initiation of the business combination and between initiation and consummation of the combination is presumed to have been acquired in contemplation of the combination. Unless there is evidence that the treasury stock was acquired for purposes other than the combination, those treasury shares, or an equivalent number of shares, are considered to be "tainted" for purposes of applying the pooling conditions. … In evaluating whether treasury stock transactions were in contemplation of the combination, the intended subsequent distribution of the treasury stock generally is more important than the business reasons for acquiring the treasury stock. For example, the fact that management of the enterprise believes that the stock is "under-valued" in the market and, therefore, reacquires a portion of the outstanding stock, does not overcome the presumption that the treasury stock was acquired in contemplation of the combination. … Materiality of Treasury Stock Acquisitions. The existence of tainted treasury shares precludes pooling-of-interests accounting for a business combination if the number of tainted treasury shares is material in relation to the total number of shares issued to effect the combination. (CT B50.566) In practice, as discussed in paragraph 3.103 of this manual, tainted treasury shares are included with other pooling violations, such as intercorporate investments, dissenters' and fractional shares acquired for cash, and minority interests left outstanding, in the calculation of the 90 percent test under the common-stock-for-common-stock condition. … Tainted Treasury Stock of the Issuing Enterprise and the Combining Enterprise. The treasury-stock condition applies to both the issuing enterprise and the combining enterprise in a business combination. The Emerging Issues Task Force discussed the treatment of tainted treasury shares in the calculation of the 90 percent test in Issue 87-16, "Whether the 90 Percent Test for a Pooling of Interests Is Applied Separately to Each Company or on a Combined Basis." (See paragraphs 3.102 through 3.109 of this manual.) In situations where both the issuing enterprise and the combining enterprise have tainted treasury shares, the Task Force concluded that the tainted treasury shares of the issuing enterprise and the tainted treasury shares of the other combining enterprise, expressed as an equivalent number of shares of the issuing enterprise's common stock based on the exchange ratio in the business combination, should be aggregated and compared to the number of shares issued in the combination in the calculation of the 90 percent test. … Examples of acquisitions of treasury stock for subsequent reissuance for purposes other than the business combination that may not violate the treasury-stock condition include…acquisition of shares to be issued under stock option or other stock compensation plans….acquisition of shares to be issued upon exercise of outstanding warrants or upon conversion of convertible debt or equity securities….acquisition of shares to be issued for stock dividends that have been declared or will be declared as a recurring distribution. So, Phoenix can repurchase the shares necessary to meet their warrant obligations to Intel and declare a dividend.