SEC Division of Corporation Finance no-action letter: Aether Systems, Inc. — SEC — US

Securities Exchange Act of 1934 - Rule 12g-3

April 26, 2005

Response of the Office of Chief Counsel Division of Corporation Finance

Re:

Aether Systems, Inc. Incoming Letter dated April 26, 2005

Based on the facts presented, the Division's views are set forth below. Capitalized terms have the same meanings defined in your letter.

Without necessarily agreeing with your analysis, the Division will not object if the Company and Holdings omit the financial and other information required by Form S-4 from the Proxy Statement/Prospectus to the same extent permitted by Instruction 4 to Item 14 of Schedule 14A. In reaching this position, we note your representation that, after the Effective Time, the financial condition of Holdings will be substantially the same as the Company's and that all information necessary for evaluation of the Reorganization will be disclosed in the Proxy Statement/ Prospectus.

Holdings may take into account the reporting history of the Company in determining whether Holdings is eligible to use Form S-3 or Form S-8 under the Securities Act, and to determine whether Holdings may furnish information in a Form S-4 under the Securities Act in a manner permitted for a company that is eligible to use Form S-3, as contemplated by General Instruction B.1.a. of Form S-4.

The Division will not object if Holdings, as successor to the Company, does not file new registration statements under the Securities Act for ongoing offerings of securities covered by the Company's currently effective registration statements on Form S-8. Instead, Holdings may adopt the Company's Stock Option Plan Registration Statements pursuant to Rule 414 under the Securities Act by filing post-effective amendments to those registration statements.

The actions to be taken by Holdings to assume the Stock Option Plans do not constitute actions that require the disclosure of information required by Item 10 of Schedule 14A.

The Reorganization is a "succession" for purposes of Rule 12g-3(a) under the Exchange Act and Holdings is an "accelerated filer" for purposes of Rule 12b-2 under the Exchange Act.

The Company's Exchange Act reporting history may be taken into account when determining Holdings' compliance with the current public information requirements under Rule 144(c)(1) under the Securities Act.

Without necessarily agreeing with your analysis, persons who receive Holdings Stock in the Reorganization may take into account the periods during which they held Company Common Stock in order to calculate their holding periods under Rule 144(d) for Holdings. Further, as previously stated in Masada Security Holdings, Inc. (December 5, 1996) and The ARA Group, Inc. (December 19, 1990), Rule 144(d)(3)(viii) does not prevent reliance on Rule 144(d)(3)(i) or Rule 144(d)(3)(ii) in a transaction satisfying the terms of those provisions, even though the transaction is one that is described in Rule 145(a).

Holdings may be treated as an issuer subject to the reporting requirements of the Exchange Act for purposes of the Rule 174(b) exemption from the prospectus delivery requirements of Section 4(3) under the Securities Act.

You have not requested that the Division confirm your views regarding the applicability of Rule 16b-7 under the Exchange Act to the Reorganization. Consequently, the Division is not expressing any view on that aspect of the Reorganization.

These positions are based on the representations made to the Division in your letter. Any different facts or conditions might require different conclusions. Further, this response expresses the Division's position on enforcement only and does not express any legal conclusion on the questions presented.

Your request for confidential treatment pursuant to 17 C.F.R. 200.81 has been granted for the earlier of (i) 120 days from the date of this letter; or (ii) such earlier date as the Merger described in your letter has been publicly disclosed.

Sincerely,

Paul Fischer Attorney Advisor

Incoming Letter:

April 26, 2005

VIA E-MAIL AND COURIER

Office of the Chief Counsel Division of Corporation Finance Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: David Lynn

Re:

Proposed Reorganization of Aether Systems, Inc.; Securities Act of 1933 - Section 4(3) and Forms S-3, S-4 and S-8 and Rules 144 and 414; and Securities Exchange Act of 1934 - Schedule 14A, Form 8-K and Rule 12g-3.

Ladies and Gentlemen:

Aether Systems, Inc., a Delaware corporation (the " Company "), is contemplating a holding company reorganization transaction (the " Reorganization ") that would result in a new Delaware corporation, expected to be called Aether Holdings, Inc. (" Holdings "), becoming the parent company of the Company and in stockholders of the Company becoming stockholders of Holdings. Holdings would be substituted for the Company as the vehicle for public equity investment in the business of the Company.

The sole purpose of the Reorganization is to implement, in a manner binding on all of the Company's stockholders, certain transfer restrictions (the " Transfer Restrictions ") designed to help the Company preserve its substantial net operating loss and capital loss carryforwards (collectively, the "" Tax Benefits "). The sole practical effect of the Reorganization will be to replace shares of the Company that are not subject to any transfer restrictions with shares of Holdings that will be subject to the Transfer Restrictions.

On behalf of the Company, we hereby respectfully request that the Division of Corporation Finance (the "" Division ") of the Securities and Exchange Commission (the "" Commission ") concur in certain opinions set forth below that we have reached on the basis of prior letters issued by the Commission referenced in this letter with respect to the applicability to the Reorganization of certain provisions of the Securities Act of 1933, as amended (the "" Securities Act "), the Securities Exchange Act of 1934, as amended (the "" Exchange Act "), and the rules and forms promulgated under each of them. Although Holdings has not yet been formed, we also hereby request the Division's confirmation that Holdings, when formed, may rely on the Division's concurrence to the same extent as the Company. This letter is intended to replace in its entirety our earlier request for no-action relief dated December 20, 2004.

I. The Company

The Company was incorporated under the laws of the State of Delaware in 1999 and has been an Exchange Act registrant since 1999. The Company owns and manages a portfolio of mortgage backed securities (" MBS ") issued by the Federal Home Loan Mortgage Association, the Federal National Mortgage Association or the Government National Mortgage Association. 1 In order to generate higher returns, the Company will leverage its cash investment by entering into short-term reverse purchase agreements with certain financial institutions. The Company's earnings represent the difference between the payments received on the MBS, less the costs of borrowings incurred to purchase the MBS and the Company's other portfolio management and operating expenses. These expenses include the management fee and the incentive fee the Company has agreed to pay its outside investment manager. An important aspect of the Company's business is to realize value, in the form of tax savings, from the Tax Benefits. The Company has filed all reports required to be filed under Section 13(a) of the Exchange Act.

A. Capital Stock

The Company's authorized capital stock consists of 1,001,000,000 shares of common stock, par value $0.01 per share (" Company Common Stock "), of which approximately 44,000,921 shares were outstanding as of March 2, 2005, and 1,000,000 shares of preferred stock, par value $0.01 per share, none of which are outstanding on the date hereof. The Company Common Stock is listed on the Nasdaq National Market and is registered pursuant to section 12(g) of the Exchange Act. As of December 31, 2004, there were approximately 553 holders of record of Company Common Stock.

As of December 31, 2004, options to acquire an aggregate of 2,082,161 shares of Company Common Stock, exercisable at various prices, were outstanding under the Company's 1999 Equity Incentive Plan and Acquisitions Incentive Plan (together, the " Stock Option Plans "), and the shares of Company Common Stock issuable upon exercise of such options are registered for continuous offering under Section 5 of the Securities Act on a Form S 8 Registration Statement, Commission File No. 333-52220 and Form S-8 Registration Statement, Commission File No. 333-52222, respectively (together, the "Stock Option Plan Registration Statements").

II. The Reorganization

A. The Merger

The Reorganization is to be effected pursuant to the following steps:

The Company will form Holdings as a new wholly owned direct subsidiary of the Company.

Holdings will form a new wholly owned direct subsidiary expected to be called Aether Merger Sub, Inc. (" Merger Sub ").

The Company, Holdings and Merger Sub will enter into an agreement and plan of reorganization (the " Reorganization Agreement "), approved by their respective boards of directors and stockholders, which will provide for the merger of Merger Sub with and into the Company (the " Merger ") pursuant to Section 251 of the Delaware General Corporation Law (the " DGCL "), with the Company being the surviving corporation in the Merger.

B. Conditions

The Reorganization Agreement will provide that consummation of the Merger will be conditioned upon:

any consents, approvals or authorizations that the Company deems necessary or appropriate to be obtained in connection with the consummation of the Reorganization having been obtained;

the adoption of the Reorganization Agreement by the stockholders of the Company, as required by the DGCL, at the Company's annual meeting (the " Shareholders Meeting ");

the approval by the Nasdaq National Market of the listing of the common stock, par value $0.01 per share, of Holdings (" Holdings Common Stock ") to be issued or reserved for issuance in connection with the Reorganization; and

the receipt by the Company, in form and substance satisfactory to it, of an opinion of its tax counsel with respect to certain federal income tax effects of the Reorganization and the Transfer Restrictions. 2

C. Conversion of Shares

The Reorganization Agreement will provide that, automatically at the time (the " Effective Time ") that the Merger becomes effective under the DGCL by the filing of a Certificate of Merger with the Delaware Secretary of State:

each share of Company Common Stock outstanding or held in the Company's treasury will be converted into the right to receive one share of Holdings Common Stock (appraisal rights will not be available under the DGCL in connection with the Merger);

each share of common stock, par value $0.01 per share, of Merger Sub will be converted into one share of the Company; and

each share of Holdings Common Stock held by the Company will be cancelled.

The relative powers, designations, preferences, rights and qualifications of the Holdings Common Stock, as in effect immediately after the Reorganization, will be equivalent in all material respects to the Company Common Stock, except that the Holdings Common Stock will be subject to the Transfer Restrictions.

The Reorganization Agreement will provide that, at the Effective Time, each outstanding option under the Stock Option Plans will become an option to acquire, on identical terms, an equivalent number of shares of Holdings Common Stock. It is not contemplated that the number of shares available for issuance under the Stock Option Plans will be increased in connection with the Reorganization or that Holdings will, at the Effective Time, have in place any other stock option plan.

The Reorganization Agreement is expected to provide that, until surrender to the designated exchange agent, each certificate representing shares of Company Common Stock outstanding immediately before the Effective Time will represent the right to receive a certificate for the same number of shares of Holdings Common Stock. However, provision will be made for stockholders to surrender their Company Common Stock certificates in exchange for a new certificate, substantively identical to the certificate representing Company Common Stock (except for a legend reflecting the Transfer Restrictions and a new corporate name and CUSIP number), evidencing shares of Holdings Common Stock. The Reorganization Agreement will condition the payment of any dividends or distributions declared on the Holdings Common Stock upon the exchange of a certificate representing Company Common Stock for Holdings Common Stock, and such exchange will also be a condition to the processing of any transfer of record of shares of Holdings Common Stock.

D. Certificate of Incorporation and By-laws

The certificate of incorporation of Holdings (the " Holdings Certificate ") will be identical to the certificate of incorporation of the Company (the "Company Certificate") in effect immediately before the Effective Time, except for the difference in the names of the two companies and the inclusion of the Transfer Restrictions (discussed in detail below).

The by-laws of Holdings (the " Holdings Bylaws ") will be identical to the by-laws of the Company (" Company Bylaws ") in effect immediately before the Effective Time, except for the difference in names and the addition of a qualification to the obligations of the Company and its transfer agent with respect to transfers of stock, which makes transfers subject to the Transfer Restrictions and other written rules adopted pursuant thereto.

The Company Certificate and the Company Bylaws in effect immediately before the Effective Time will be changed after the Effective Time to reflect the fact that the Company will be a wholly owned subsidiary of Holdings and will no longer be a publicly traded company.

E. Capital Stock of Holdings

Because the Holdings Certificate will be equivalent to the Company Certificate, the capital structure of Holdings following the Effective Time will be identical to the capital structure of the Company immediately before the Effective Time and the securities that stockholders of the Company will receive in the Reorganization will be identical to the securities exchanged, except that the Holdings Common Stock, unlike Company Common Stock, will be subject to the Transfer Restrictions.

As indicated above, the Reorganization will be conditioned on Holdings Common Stock being approved for listing on the Nasdaq National Market as is currently the case for Company Common Stock.

F. Directors and Executive Officers of Holdings; Committees of the Holdings Board; Executive Compensation

It is contemplated that immediately following the Effective Time the board of directors of Holdings (the " Holdings Board ") will consist of the same seven individuals who comprised the board of directors of the Company (the " Company Board ") immediately before the Effective Time, with their respective terms as directors of Holdings expiring when their respective terms of office as directors of the Company would have expired. The Holdings Board will establish the same committees as the Company Board, and each committee of the Holdings Board will be comprised of the same directors as the corresponding committee of the Company Board. Each committee of the Holdings Board will have a charter that is identical to the charter of the corresponding committee of the Company Board prior to the Reorganization.

The individuals who are executive officers of the Company immediately before the Effective Time will be the only executive officers of Holdings immediately following the Effective Time, holding corresponding offices. It is possible that the directors and officers of the Company following the Effective Time may be changed after the Effective Time to reflect the fact that the Company will be a wholly owned subsidiary of Holdings and will no longer be a publicly traded company.

Although no determination has yet been made as to the allocation of the compensation of the present directors and executive officers of the Company as between their service for Holdings and their service (if any) for the Company following the Reorganization, the aggregate compensation of those individuals will not increase as a result of the Reorganization; they will continue to receive the same aggregate compensation as they presently receive from the Company (unless and until it is changed at some future time following the Effective Time by the Holdings Board).

G. Business and Financial Statements of Holdings

Prior to the Reorganization, Holdings will conduct no business other than in connection with the effectuation of the Reorganization, and it will have only nominal assets, liabilities and capitalization (the same will be the case with respect to Merger Sub, which will disappear in the Reorganization). Following the Reorganization, the sole business of Holdings will be to own 100% of the outstanding Company Common Stock and thus function as a holding company. The Company will continue to engage in its present business as a continuing corporation, and all of its contractual, employment and other business relationships will generally continue unaffected by the Reorganization. It is not generally contemplated that Holdings will assume or guarantee any of the Company's obligations, other than the Stock Option Plans.

Holdings and the Company will be members of an affiliated group filing a consolidated tax return for federal income tax purposes. Holdings and the Company will also constitute a single consolidated group for purposes of accounting and financial reporting. The consolidated assets and liabilities of Holdings and its subsidiaries immediately following the Effective Time will be the same as the consolidated assets and liabilities of the Company and its subsidiaries immediately before the Effective Time.

It is contemplated that KPMG LLP, the Company's independent auditors, will serve as the independent auditors of Holdings and its subsidiaries, including the Company, after the Effective Time.

H. Securities Act and Exchange Act Filings Related to the Reorganization

A registration statement on Form S-4 covering the shares of Holdings Common Stock to be issued in the Reorganization will be filed with the Commission by Holdings under Section 5 of the Securities Act (the " Reorganization Registration Statement "). The prospectus of Holdings included in the Reorganization Registration Statement will also constitute a proxy statement of the Company with respect to the Reorganization (the " Reorganization Proxy Statement/Prospectus ") pursuant to which proxies in favor of the Reorganization will be solicited by the Company's Board pursuant to Section 14(a) of the Exchange Act.

Assuming the Division concurs with our opinion as to the applicability to the Reorganization of Rule 12g-3(a) under the Exchange Act set forth in paragraph III.E below, the Holdings Common Stock will be deemed registered under the Exchange Act pursuant to Rule 12g-3(a) and Holdings will assume the Section 13(a) and 15(d) filing obligations of the Company. In that event, Holdings will file a current report on Form 8-K reporting the occurrence of the Reorganization and the succession thereunder of Holdings to the Company's reporting obligations under Sections 13(a) and 15(d) of the Exchange Act.

I. The Transfer Restrictions

General

As indicated above, the sole purpose of the Reorganization is to implement the Transfer Restrictions in order to help the Company preserve the Tax Benefits, and the only substantive difference between the Holdings Common Stock and the Company Common Stock is that the Holdings Common Stock will be subject to the Transfer Restrictions. The Transfer Restrictions generally will prohibit, absent approval of the Holdings Board, any transfers to persons holding, or who thereafter would hold, 5% or more of Holdings Common Stock, as well as certain transfers (described below) by persons who hold 5% or more of Holdings Common Stock.

The Transfer Restrictions are intended to prevent transactions that would result in an "ownership change" (an " Ownership Change ") as defined in section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder (collectively, " Section 382 "). The Holdings Common Stock to be issued by Holdings in exchange for Company Common Stock will be deemed to be issued after the adoption of the Transfer Restrictions, which will be set forth in Article Thirteenth of the Holdings Certificate.

Under Section 202 of the DGCL, a Delaware corporation is permitted to impose written restrictions on the transfer, or registration of transfer, of its securities if the restrictions satisfy certain specified content criteria, and such written restrictions are enforceable against the holder of the restricted security or any successor or transferee of the holder provided they are noted conspicuously on the certificate representing the security or the person against whom the restrictions are sought to be enforced has actual knowledge of the restrictions. However, no such restriction is binding with respect to securities issued prior to such restriction's adoption unless the holders of those securities are party to an agreement or voted in favor of the restriction. Thus, if the Company were to seek to effect the Transfer Restrictions by submitting for stockholder approval an amendment to the Company Certificate, and such amendment were approved, the Transfer Restrictions would not bind any shares of Company Common Stock that were not voted in favor of the amendment.

In contrast, however, the consummation of the Reorganization by means of the Merger pursuant to section 251 of the DGCL will result in the issuance of Holdings Common Stock to all holders of Company Common Stock who will thereafter be bound by the Transfer Restrictions.

Potential Impact of Section 382 on the Tax Benefits

Section 382 provides that if a corporation undergoes an Ownership Change, its ability to use its net operating loss and capital loss carryforwards may be limited. In general, an Ownership Change occurs when the percentage of a corporation's capital stock owned by one or more persons owning (within the meaning of Section 382) 5% or more of the fair market value of such stock is more than 50% higher than the lowest percentage that such persons owned at any time during a specified three-year testing period. For purposes of determining percentage ownership, Section 382 generally defines stock to include all issued and outstanding stock (except certain preferred stock). In addition, certain stock that may be acquired pursuant to warrants, options, or purchase or conversion rights under certain circumstances may be deemed to have been acquired for purposes of determining the occurrence of an Ownership Change.

Based on information currently available to the Company, the Company had, as of December 31, 2004, net operating loss carryforwards of approximately $765.5 million, expiring between 2012 and 2024 and capital loss carryforwards of approximately $245.3 million, expiring between 2006 and 2009. The Company's loss carryforwards are an important part of its MBS business strategy because they are available to reduce income tax liabilities that the Company otherwise expects it would face in the future.

Calculating whether an Ownership Change has occurred is subject to inherent uncertainty because of the complexity and ambiguity of Section 382 and because of limitations on a publicly traded corporation's knowledge as to the ownership of, and transactions in, its securities. As of December 31, 2004, the Company believes that it has not experienced an Ownership Change.

The Company has disclosed in reports filed under the Exchange Act the possibility that an Ownership Change would severely limit future usage of the Tax Benefits. The Transfer Restrictions are intended to provide the Company a means for preventing transactions that could cause an Ownership Change and thus preserve the Tax Benefits.

Summary of Transfer Restrictions

It is contemplated that the Transfer Restrictions will be substantially as set forth in Exhibit A hereto and will be effective from and after the Effective Time. The following summary is subject in its entirety to the complete terms and conditions of the Transfer Restrictions set forth in Exhibit A . The Transfer Restrictions will apply to transfers of Holdings Common Stock, any other instrument that would be treated as "stock" of Holdings under Section 382 and options to acquire Holdings Common Stock (together, " Stock "). The Transfer Restrictions will apply until the Holdings Board determines that no Tax Benefits may be carried forward, which is expected to be at least 20 years. However, the Holdings Board will have the power to accelerate or extend the expiration date of the Transfer Restrictions if it determines in writing that such action is reasonably necessary or desirable to preserve the Tax Benefits or that the continuation of the Transfer Restrictions is no longer reasonably necessary for the preservation of the Tax Benefits.

Prohibited Transfers

The Transfer Restrictions generally will restrict any direct or indirect transfer if the effect would (1) be to increase the ownership of stock by any person (or public group) to 5% or more of the stock of Holdings; (2) increase the percentage of stock owned by a person (or public group) owning 5% or more of the stock of Holdings or (3) create a new public group.

Transfers included under the Transfer Restrictions include sales to persons (or public groups) whose resulting percentage ownership of stock of Holdings would exceed the 5% thresholds discussed above, or to persons whose ownership of shares would by attribution cause another person (or public group) to exceed such thresholds (a " Five Percent Shareholder ").

For purposes of determining the existence and identity of, and the amount of stock owned by, any stockholder, Holdings will be entitled to rely conclusively on (a) the existence or absence of filings of Schedules 13D and 13G (or any similar schedules) as of any date and (b) Holdings' actual knowledge of the ownership of its stock. The Transfer Restrictions will include the right to require a proposed transferee, as a condition to registration of a transfer of stock, to provide all information reasonably requested regarding such person's direct and indirect ownership of Holdings' stock.

Treatment of Pre-existing 5% Stockholders

The Transfer Restrictions contain exceptions permitting certain otherwise prohibited transfers by Pre-existing 5% Stockholders. "Pre-existing 5% Stockholders" means (1) any person or entity who (a) has filed a Schedule 13D or Schedule 13G on or before the date of the first public announcement of the Company's intention to implement the transfer restrictions or (b) establishes, on or before the thirtieth day following completion of the Reorganization, to the satisfaction of the Holdings Board, that such person or entity was a direct or indirect owner of 5% of Holdings Common Stock on the day before the first public announcement of the Company's intention to seek to implement the transfer restrictions and (2) certain persons and entities with specified ownership interests in the foregoing persons or entities.

Pre-existing 5% Stockholders will receive different treatment in two respects under the transfer restrictions. First, a transfer of any interest in any Pre-existing 5% Stockholder will not be prohibited, notwithstanding the fact that such transfer would constitute a transfer of a proportionate amount of such Pre-existing 5% Stockholder's ownership of Holdings Common Stock for purposes of Section 382. Second, in contrast to the treatment of persons who become "5-percent shareholders" (for purposes of Section 382) on or after the day before the first public announcement of the Company's intention to seek to implement the transfer restrictions and before the completion of the Reorganization who will be prohibited from disposing of any shares of Holdings Common Stock without the express consent of Holdings Board, a transfer of shares of Holdings Common Stock by (but not to) a Pre-existing 5% Stockholder will be permitted even though it would create a new "public group" of Holdings so long as such a transfer would not increase the ownership of stock by any person (other than a new public group) to 5% or more of the stock of Holdings or increase the percentage of stock owned by a person (other than a new public group) owning 5% or more of the stock of Holdings. In any such case, the transferred shares must have been acquired in exchange for shares of Company Common Stock already owned by such Pre-existing 5% Stockholder on the day before the first public announcement of the Company's intention to seek to implement the transfer restrictions.

These provisions will not permit Pre-existing 5% Stockholders to increase their ownership of Holdings Common Stock without specific approval of the Holdings Board but will permit Pre-existing 5% Stockholders to dispose of shares of Holdings Common Stock received in exchange for shares of Company Common Stock already owned by them prior to the first public announcement by the Company of its intention to seek to implement the Transfer Restrictions.

Exemptive Power of Holdings Board

The Transfer Restrictions will not apply to any attempted Transfer that would otherwise be prohibited if the transferor or transferee obtains the prior written approval of the Holdings Board.

Consequences of Purported Prohibited Transfer

Any direct or indirect transfer of stock attempted in violation of the Transfer Restrictions will be void as of the date of the purported transfer as to the purported transferee (or, in the case of an indirect transfer, the ownership by the direct owner of the stock of Holdings would terminate simultaneously with the transfer), and the purported transferee (or in the case of any indirect transfer, the indirect owner) would not be recognized as the owner of the shares owned in violation of the Transfer Restrictions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such stock, or in the case of options, receiving stock in respect of their exercise. Any stock acquired in violation of the transfer restrictions is referred to herein as " Excess Stock ."

In addition to the purported transfer being void as of the date of the purported transfer, upon demand, the purported transferee will be required to transfer the Excess Stock to an agent designated by Holdings along with any dividends or other distributions paid with respect to Excess Stock. Votes cast by a purported transferee with respect to Excess Stock will be rescinded as void. The designated agent will be required to sell such Excess Stock in an arms' length transaction (or series of transactions) that would not constitute a violation of the Transfer Restrictions. The net proceeds of the sale, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount equal to the extent of such proceeds up to the cost (or in some circumstances the fair market value of the Excess Stock on the date of the violative transfer) incurred by the purported transferee to acquire such Excess Stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary together with any other distributions with respect to such Excess Stock received by Holdings' agent. If the Excess Stock is sold by the purported transferee, such person will be treated as having sold the Excess Stock on behalf of the transferring stockholder, and will be required to remit all proceeds to Holdings' agent (except to the extent the agent grants written permission to the purported transferee to retain an amount equal to the amount such person otherwise would have been entitled to retain had the agent sold such shares).

Any holder of Holdings Common Stock who knowingly violates the Transfer Restrictions will be liable for any and all damages suffered by Holdings as a result of such violation, including damages resulting from a reduction in or elimination the ability to utilize the Tax Benefits and any professional fees incurred in connection with addressing such violation.

With respect to any Transfer of Stock which does not involve a transfer of "securities" of Holdings within the meaning of the DGCL (" Securities ") but which would cause any Five Percent Shareholder to violate the Transfer Restrictions, the following procedure will apply: the Five Percent Shareholder will be deemed to have disposed of (and will be required to dispose of) sufficient Securities, simultaneously with the Transfer, to cause the Five Percent Shareholder not to be in violation of the Transfer Restrictions, and such Securities will be treated as Excess Stock to be disposed of through the Agent under the provisions summarized above, with the maximum amount payable to the Five Percent Shareholder from the proceeds of sale by the Agent being the fair market value of the Excess Stock at the time of the prohibited Transfer.

Other Powers of Holdings Board

The Holdings Board will have the power to accelerate or extend the expiration date of the Transfer Restrictions or modify the definitions of any terms set forth therein in the event of a change in law or regulation, provided the Holdings Board determines in writing that such action is reasonably necessary or advisable to preserve the Tax Benefits or that continuation of the Transfer Restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. In addition, the Holdings Board will have the power to adopt bylaws, regulations and procedures, not inconsistent with the Transfer Restrictions, for purposes of determining whether any acquisition of Stock would jeopardize the ability of Holdings to preserve and use the Tax Benefits and for the orderly application, administration and implementation of the Transfer Restrictions. The Holdings Board will also have the exclusive power and authority to administer, interpret and make calculations under the Transfer Restrictions, which actions shall be final and binding.

III. Request

On behalf of the Company and Holdings, we hereby respectfully request that the Division concur in each of the following opinions, which are discussed more fully below, and that the Division confirm that Holdings, when formed, may rely on the Division's concurrence in such opinions to the same extent as the Company:

The Company and Holdings may omit from the Reorganization Proxy Statement/Prospectus the financial and other information about the Company and Holdings required by Form S-4 under the Securities Act analogous to the information that may be omitted pursuant to Instruction 4 to Item 14 of Schedule 14A under the Exchange Act (" Schedule 14A ").

Holdings may include the reporting history of the Company in determining whether Holdings meets the eligibility requirements for the use of registration statements under the Securities Act, including Forms S-3, S-4 and S-8. In addition, for purposes of the Reorganization Registration Statement, historical information may be furnished in the manner permitted for an issuer eligible to use Form S-3, as such information relates to the Company, rather than to Holdings.

After the Effective Time, Holdings will constitute a "successor issuer" of the Company for purposes of Rule 414 under the Securities Act (" Rule 414 ") and may file post-effective amendments to the Stock Option Plan Registration Statements as contemplated by Rule 414.

The actions to be taken by Holdings to assume the Stock Option Plans do not constitute actions that require the disclosure of information required by Item 10 of Schedule 14A.

Holdings Common Stock will be deemed to be registered under the Exchange Act pursuant to Rule 12g-3(a) thereunder, and Holdings should, in lieu of filing a registration statement under Section 12(g) of the Exchange Act, file a current report on Form 8-K following the Effective Time reporting, under Item 8.01 thereof, the occurrence of the Reorganization and the succession thereunder of Holdings to the Company's reporting obligations under Sections 13(a) and 15(d) of the Exchange Act. Accordingly, while Form 8-A would be available to Holdings for registering the Holdings Common Stock under Section 12(g), the filing of a Form 8-A will not be required. In addition, Holdings will be an "accelerated filer," as such term is defined in Rule 12b-2.

The Company's prior reports may be taken into account in determining Holdings' compliance with the current public information requirements of Rule 144(c)(1) under the Securities Act.

Holders of Holdings Common Stock may tack periods during which they held Company Common Stock for purposes of satisfying the holding period requirements of Rule 144(d).

Dealers need not comply with the prospectus delivery requirements of Section 4(3) of the Securities Act and Rule 174 thereunder with respect to Holdings after the Reorganization.

Persons who have filed statements on Schedule 13D or Schedule 13G reporting beneficial ownership of Company Common Stock will not be required to make any additional or amended filings as a result of the Reorganization but may note in their next subsequent filings on Schedule 13D or Schedule 13G, as applicable, that Holdings is the successor issuer to the Company.

IV. Discussion

The positions set forth above are based on, and consistent with, previous determinations of the Commission in similar holding company reorganizations under section 251(g) of the DGCL 3 and other analogous transactions. 4

A. Financial and Certain Other Disclosure Requirements of Form S-4 and Schedule 14A

Item 3(d), (e) (subject to a materiality requirement which we do not believe will be met with respect to the Reorganization) and (f) and Item 5 of Form S-4 require that a prospectus filed as part of a registration statement on Form S-4 include the following disclosures: (i) the selected financial data required by Item 301 of Regulation S-K; (ii) the selected financial data required by Item 301 of Regulation S-K prepared on a pro forma basis; (iii) certain comparative historical and pro forma per share data of the registrant and the company being acquired; and (iv) the pro forma financial information required by Article 11 of Regulation S-X. In addition, Subparts B and C of Part I of Form S-4 require certain historical financial and other information with respect to the registrant and the company being acquired.

The Division has previously taken the position that a registrant engaged in a transaction (i) involving only the registrant and one or more of its wholly owned subsidiaries and (ii) not involving a liquidation of the registrant or a spin-off, such as an internal reorganization to create a holding company, may omit from its proxy statement/prospectus filed as part of a registration statement on Form S-4 such information as may be omitted pursuant to Instruction 4 to Item 14 of Schedule 14A. Item 14 of Schedule 14A requires a registrant engaged in a merger to furnish, among other things, the same information as that required by Item 3(d), (e) and (f), Item 5 and Subparts B and C (Items 10-17) of Form S-4. Instruction 4 to Item 14 of Schedule 14A, however, provides that the foregoing information may be omitted where the plan of merger involves "only the acquiring company and one or more of its totally held subsidiaries and does not involve a liquidation of the registrant or spin-off."

The Reorganization will involve only the Company and Merger Sub as constituent corporations and Holdings as the issuer of Holdings Common Stock that stockholders of the Company will receive (on a one-for-one basis) in the Reorganization in exchange for shares of Company Common Stock. The Company will survive as an operating corporation, and none of its assets or business will be spun off. Following the Effective Time, Holdings' consolidated financial condition will be substantially the same as that of the Company before the Effective Time. Finally, all information necessary for the approval of the Reorganization by the Company's stockholders will be provided in the Reorganization Proxy Statement/Prospectus. Accordingly, we are of the opinion that the Company and Holdings may omit from the Reorganization Proxy Statement/Prospectus such information (Item 3(d), (e) and (f), Item 5 and Subparts B and C (Items 10-17) to Part I of Form S-4) as may be omitted pursuant to Instruction 4 of Item 14 of Schedule 14A. 5

B. Forms S-3, S-4 and S-8

General Instruction I.A.7 to Form S-3 deems a successor registrant to have met the conditions for eligibility to use a Form S-3 set forth in General Instructions I.A.1, 2, 3 and 5 to Form S-3 if (i) its predecessor and it, taken together, meet such conditions, (ii) the succession was primarily for purposes of forming a holding company and (iii) the assets and liabilities of the successor at the time of succession were substantially the same as those of the predecessor. The Company currently meets the conditions set forth in General Instructions I.A. 1, 2, 3 and 5 of the General Instructions to Form S-3.

Consistent with General Instruction I.A.7 to Form S-3, Holdings will be the successor publicly traded company to the Company, with no business other than owning 100% of the Company Common Stock, and, on a consolidated basis, Holdings and the Company will have, immediately following the Effective Time, the same assets and liabilities as the Company had immediately before the Effective Time. Although Holdings will not, as a matter of corporate law, become the legal owner of the Company's assets or an obligor of the Company's obligations because the Company will not be merging into Holdings, the Reorganization will, for all purposes of General Instruction I.A.7 to Form S-3, create a successor registrant.

General Instructions B.1.a and B.1.b to Form S-4 allow a registrant that satisfies the eligibility conditions for the use of Form S-3 to furnish less extensive information in a Form S-4 registration than would be required of a registrant that is not eligible to use Form S-3. As discussed above, the Company currently satisfies the relevant portions of General Instruction 1.A. of Form S-3. In addition, the Company satisfies the aggregate market value requirement of General Instruction B.1.a.ii.A of Form S-3. Assuming that the Division concurs with our opinion that Holdings should be permitted to rely on the prior reporting history of the Company for purposes of determining Holdings' eligibility to use Form S-3, we are of the further opinion that Holdings "meets the requirements for use of Form S-3" as such phrase is used in General Instructions B.1.a and B.1.b of Form S-4. 6

Accordingly, we are of the opinion that, after the Effective Time, Holdings will be entitled to take into account the Company's reporting history prior to the Effective Time in determining Holdings' eligibility to use various forms of registration statements under the Securities Act, including Forms S-3, S-4 and S-8. 7

We further conclude that for purposes of the Reorganization Registration Statement, information may be furnished in the manner permitted by a registrant eligible to use Form S-3, as such information relates to the Company, rather than to Holdings. 8

C. Form S-8 and Rule 414

As noted above, the Company presently has in effect the Stock Option Plan Registration Statements covering the shares of Company Common Stock issuable upon exercise of options outstanding thereunder, and in the Reorganization Holdings will assume such options and the related Stock Option Plans. Rule 414 under the Securities Act provides that, if certain conditions are met in connection with the succession of a successor issuer to a predecessor issuer, the registration statement of the predecessor issuer will be deemed to be the registrant statement of the successor issuer for the purpose of continuing the offering covered by such registration statement.

The following conditions of Rule 414 will all be satisfied, in our view, with respect to the Reorganization: (i) the purpose of the Reorganization will be to change the form of organization of the Company by creating a holding company structure; (ii) immediately prior to the Effective Time, Holdings, the successor issuer, will have only nominal assets and liabilities; (iii) the succession, via the Reorganization, will be approved by the stockholders of the Company at a meeting at which proxies will be solicited pursuant to Section 14(a) of the Exchange Act; and (iv) if the Division concurs in our request, Holdings, as the successor issuer, will file an amendment to the Stock Option Plan Registration Statements expressly adopting it as its own registration statement for all purposes of the Securities Act and the Exchange Act, and Holdings will set forth any additional information necessary to reflect any material changes made in connection with or resulting from the succession or otherwise required by Rule 414.

The only condition of Rule 414 which will not technically be met with respect to the Reorganization is that the succession of Holdings to the Company will not be effected by a merger under which Holdings will acquire all of the assets and assume all of the liabilities and obligations of the Company. Rather, as described above, the constituent corporations to the Merger will be the Company and Merger Sub, and in the Merger, Merger Sub will merge into the Company and as a result Holdings will become the parent company of the Company, with the Company surviving as a wholly owned subsidiary of Holdings. In our view, this structural difference is not material to the purpose of, or the policy underlying, Rule 414. We note that the Division has previously concurred in similar circumstances with the conclusion that Rule 414 should permit Holdings to satisfy the registration requirements of the Securities Act with respect to such Holdings Common Stock by filing a post-effective amendment to the existing registration statement. 9 Accordingly, we are of the opinion that the Stock Option Plan Registration Statements will be deemed to be the corresponding registration statements of Holdings as the "successor issuer for the purpose of continuing the offering."

D. Item 10 of Schedule 14A

At the consummation of the Reorganization, Holdings will assume and continue the Stock Option Plans, be substituted as the "Company" under the terms and provisions of the Stock Option Plans and assume all rights and obligations of the Company under the Stock Option Plans as theretofore in effect and all stock options outstanding thereunder. The Stock Option Plans and all outstanding options issued thereunder shall, pursuant to their terms, thereafter apply to shares of Holdings Common Stock in the same manner as they have applied to shares of the Company Common Stock. The succession of Holdings to the obligations of the Company under the Stock Option Plans is simply a conversion of existing rights to a new successor issuer.

In our view, the Reorganization will not have any effect on the Stock Option Plans, and the Reorganization does not constitute or require "actions" that would trigger a need to disclose information about the Stock Option Plans under Item 10 of Schedule 14A. The assumption by Holdings of the obligations of the Company under the Stock Option Plans will not constitute the approval of a new compensation plan under which equity securities of Holdings will be authorized for issuance or the amendment or modification of an existing plan. The Transfer Restrictions do not amount to an amendment or modification of the Stock Option Plans because (i) imposition of the Transfer Restrictions on the Holdings Common Stock does not require or result in any change to the Stock Option Plans and (ii) sales by participants of Holdings Common Stock acquired under the Stock Option Plans will not be limited by the Transfer Restrictions.

The terms, conditions and rights of participants under the Stock Option Plans will not be affected in, or as a result of, the Reorganization. Holdings will assume and continue without modification the Stock Option Plans. Furthermore, while Holdings Common Stock issued upon the exercise of options after the Reorganization will be subject to the Transfer Restrictions, sales of such Holdings Common Stock will not be limited by the Transfers Restrictions because, as described under paragraph II.I.4, 5 and 7, the Transfer Restrictions will not apply to sales to any stockholder that is not a Five Percent Shareholder or by Pre-existing 5% Stockholders, and even in the event of a sale by a participant under the Stock Option Plan that violates the Transfer Restrictions, the purported transferee, not the participant transferor, becomes the subject of the Transfer Restrictions. The Commission has previously taken similar positions with respect to disclosure under Item 10 of Schedule 14A in the context of transactions similar to the Reorganization. 10

Accordingly, we are of the opinion that the assumption of the Stock Option Plans by Holdings as a consequence of the Reorganization does not constitute actions that require disclosure of information under Item 10. The Reorganization Proxy Statement/Prospectus will make clear that a consequence of approval of the Reorganization will be the assumption by Holdings of the Stock Option Plans. 11

E. Rules 12g-3 and 12b-2

Rule 12g-3(a) under the Exchange Act provides that where, in connection with a succession by merger, consolidation, exchange of securities or acquisition of assets, equity securities of an issuer, not previously registered pursuant to Section 12 of the Exchange Act, are issued to the holders of any class of equity securities of another issuer which is registered pursuant to Section 12, the class of securities so issued in the succession transaction shall be deemed to be registered pursuant to Section 12 unless, upon consummation of the succession, such new class is exempt from Section 12 registration other than by Rule 12g3-2 (which is inapplicable to the present situation) or all securities of subject class are held of record by less than 300 persons. Exchange Act Release No. 34-9072 (February 10, 1971) provides that successor issuers are "required to file a report pursuant to Section 13 on Form 8-K with respect to the transaction."

We are of the opinion that Holdings will be deemed to be a successor to the Company for purposes of Rule 12g-3(a). The consolidated assets and liabilities of Holdings immediately after the Effective Time will be the same as those of the Company immediately before the Effective Time. Holdings, like the Company, will be an accelerated filer after the Effective Time. Similarly, the stockholders of the Company immediately before the Effective Time will be the stockholders of Holdings immediately after the Effective Time and the number of holders of record of Holdings Common Stock immediately following the Effective Time will be the same as the number of holders of record of Company Common Stock immediately before the Effective Time.

We are of the opinion that, while Holdings would be eligible, as successor to the Company, to use Form 8-A to register the Holdings Common Stock under Section 12(g), the availability and application of Rule 12g-3(a) will enable Holdings to register the Holdings Common Stock under Section 12(g) without having to file Form 8-A. 12

Furthermore, based on our opinion that Holdings should be deemed to be a successor to the Company, we are of the opinion that the Company's status as an accelerated filer under Rule 12b-2 of the Exchange Act and its history of filing annual reports pursuant to the Exchange Act will be carried over to Holdings, making Holdings an "accelerated filer" as such term is defined in Rule 12b-2 of the Exchange Act. 13

F. Rule 144(c)(1)

Rule 144 of the Securities Act imposes certain conditions on the sale of restricted securities and the sale of securities by or for the account of affiliates of an issuer. Rule 144(c)(1) requires that the issuer have securities registered pursuant to Section 12 of the Exchange Act, have been subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act for a period of at least 90 days immediately preceding the sale of securities, and have filed all reports required to be filed under the Exchange Act during the 12 months preceding such sale (or for such shorter period that the issuer was required to file such reports).

Holdings will have the same consolidated assets, business and operations as the Company had prior to the Reorganization. Further, the Company has been subject to, and has complied with, the reporting requirements of Section 13 of the Exchange Act since 1999. Accordingly, we are of the opinion that for purposes of Rule 144, the prior reports of the Company may be included for purposes of determining whether Holdings has complied with the public information requirements of Rule 144(c)(1).

G. Tacking for Purposes of Rule 144(d)

All holders of Company Common Stock who are affiliates of the Company are subject to limitations imposed by Rule 144(e)(1) under the Securities Act. The Reorganization will be a transaction described in Rule 145(a) under the Securities Act. Furthermore, all affiliates of the Company immediately prior to the Effective Time will be, immediately after the Effective Time, affiliates of Holdings, holding registered shares of Holdings Common Stock. As a result of the Reorganization, affiliates of the Company prior to the Reorganization would be subject to the resale provisions under Rule 145(d) (including Rule 145(d)(2) and (3), which require determination of the holding period in accordance with Rule 144(d)). Affiliates of the Company who are affiliates of Holdings after the Reorganization will be permitted to make resales of Holdings Common Stock in accordance with Rule 145(d)(1), and affiliates of the Company who cease to be affiliates of Holdings after the Reorganization will be permitted to make resales of Holdings Common Stock in accordance with Rule 145(d)(1), (2) or (3). 14

The holding period requirements of Rule 144(d)(1) are intended to assure that persons holding restricted securities have assumed the economic risks of investment, and therefore, are not acting as conduits for the sale to the public of unregistered securities, directly or indirectly, on behalf of the issuer. 15 The Commission has consistently permitted tacking of holding periods where a holding company was created to become the parent of a pre-existing company.

Rule 144(d)(3)(i) expressly permits tacking of the holding periods and provides that securities acquired from an issuer, pursuant to a recapitalization, shall be deemed to have been acquired at the same time as the securities which were surrendered in connection with the recapitalization. While the term "recapitalization" is not defined in Rule 144, the Commission has in the past permitted tacking in connection with the creation of a holding company structure if: (i) the holding company stock was issued solely in exchange for the operating company's common stock; (ii) security holders received securities of the same class and in the same proportions as exchanged; (iii) the holding company is newly formed and had no significant assets except operating company securities immediately after the transactions and at that time, had substantially the same assets and liabilities on a consolidated basis as those of the operating company immediately prior to the transaction; and (iv) the rights and interests of common stockholders in the holding company are substantially the same as the rights and interests of common stockholders in the operating company.

We are of the opinion that the Reorganization should be viewed as a "recapitalization" for purposes of Rule 144 because the Reorganization satisfies each of the prongs set forth by the Commission: (i) Holdings Common Stock will be issued solely in exchange for Company Common Stock, (ii) the stockholders of the Company will receive voting common stock in Holdings on a proportional basis, and (iii) Holdings was recently formed, has no significant assets and following the Reorganization on a consolidated basis, will have virtually the same assets and liabilities as the Company will have immediately prior to the Reorganization. In addition, (iv) the rights of the stockholders of both companies are substantially the same except for the Transfer Restrictions discussed above, and the stockholders will continue to bear the economic risks of their investment. No consideration for the Holdings Common Stock will be paid by the stockholders for the Holdings Common Stock. The end result of the Reorganization is a holding company structure without a change in proportional ownership or economic risk among the stockholders, which are essential elements to permit tacking.

We do not believe the addition of the Transfer Restriction to the Holdings Common Stock impacts the ability of the holders of the Holdings Common Stock to tack for purposes of Rule 144(d). The Transfer Restrictions are the only difference between the Company Common Stock and the Holdings Common Stock. The Commission has approved tacking where there have been significant corporate changes to charter and bylaws. For example, a reduction in the voting power of a class of common stock, establishment of a supermajority voting requirement, elimination of cumulative voting, authorization to issue "blank-check" preferred stock and the manner in which stockholders meetings were called have each been determined not to have any material bearing on the conduct of a corporation's business or shareholder's attendant risk and tacking has been permitted despite such changes being made. In analyzing these changes, the Commission has stated that a change in the governing instruments of a corporation is not relevant to tacking if the provisions concern "changes of control" and do not alter the "substance of the company's business (viz., the nature of the business and management � remains essentially the same as before)." While we are not aware of any No-Action Letter that has specifically addressed tacking in a situation where a company's charter and by-laws have been changed to impose transfer restrictions, the Transfer Restrictions (like the other restrictions examined and passed upon by the Commission) concern changes of control. In fact, we believe that the Transfer Restrictions are far less intrusive and have less impact on the day-to-day rights of stockholders than many of these other restrictions. The rights of a stockholder to vote and receive dividends is not affected by the Reorganization, and the Company's business will remain the same after the Reorganization. The board of directors and executive officers of the Company will also be the same as the board of directors and executive officers of Holdings after the Reorganization.

Accordingly, we are of the opinion that holders of Holdings Common Stock received in the Reorganization that is subject to Rule 145(d) (including affiliates of the Company) can tack the periods during which they held Company Common Stock for purposes of satisfying the holding period requirements of Rule 144(d).

H. Section 4(3) Prospectus Delivery Requirements

The 90-day prospectus delivery requirements of Section 4(3) of the Securities Act will not apply to dealers of Holdings Common Stock because Holdings will have the same consolidated assets, liabilities, business and operations as the Company immediately before the Effective Time and will be the successor to the Company. Under Rule 174(b), a dealer need not deliver a prospectus if the issuer is a Exchange Act reporting company. The Company has been a reporting company under Section 13 of the Exchange Act since 1999, and Holdings, as the successor to the Company, will assume the Company's reporting status after the Effective Time. As a result, we are of the opinion that Holdings will be deemed an Exchange Act reporting company and dealers of Holdings Common Stock will be able to rely on Rule 174(b) with respect to prospectus delivery requirements.

I. Schedules 13D and 13G

Section 13(d)(1) of the Exchange Act and Rule 13d-1 thereunder require that a person who acquires beneficial ownership of more than 5% of any equity security of a class registered pursuant to Section 12 of the Exchange Act file a statement on Schedule 13D or 13G. Section 13(d)(2) of the Exchange Act and Rule 13d-2 thereunder require the Schedule 13D to be amended when material changes in ownership occur and the Schedule 13G be amended within 45 days after the end of the calendar year.

As discussed above, after the Reorganization, Holdings will represent essentially the same company (on a consolidated basis with the Company) as did the Company prior to the Reorganization. No changes in ownership will occur as a result of the Reorganization, other than the exchange of Holdings Common Stock for Company Common Stock on a one-for-one basis. Relative percentage interests of holders before and after the Reorganization will be identical. Consequently, persons who have filed a Schedule 13D or 13G for securities acquired in Holdings will not be required to file a new or amended Schedule 13D or 13G, provided they state in their next required amendment to Schedule 13D or 13G that Holdings is deemed the successor issuer to the Company for purposes of filings under Section 13(d).

V. Conclusion

On behalf of the Company, we respectfully request the concurrence of the Division in each of the opinions listed above under the heading "Request." We also request that the Division confirm that Holdings, when formed, may rely on the Division's concurrence in such opinions to the same extent as the Company. Since the Company will delay the initial filing of the Reorganization Proxy Statement/Prospectus until the outcome of this request is known, we hereby respectfully request that this matter be given expedited consideration by the Division's staff. If the Division disagrees with any of our conclusions or any other matters discussed in this letter, we would like an opportunity to discuss them with the Division prior to any written response to this letter.

We hereby request that this letter (including any covering or transmittal letter), the Division's response and the supplemental information submitted thereto be afforded confidential treatment for, and the publication of this letter be delayed until, 120 days after the date of the Division's response or such earlier date as the Division is advised that all information in this letter has been made public, as contemplated by �200.81(b). We will contact the Commission if this information is made public at an earlier date. This confidential information request is set forth in its entirety in a separate letter filed previously.

If you have any questions or you require additional information concerning this letter or any matter discussed herein, please contact the undersigned at (202) 879-5151 or David Lambert of this office at (202) 879-5911.

Very truly yours,

Mark D. Director

Exhibit A

Endnotes

1 The Company intends to rely on the exception from the definition of an "investment company" set forth in Section 3(c)(5)(C) of the Investment Company Act of 1940, as amended (the "Investment Company Act"). During any temporary transition period during which the Company does not meet the criteria set forth by the staff of the Division of Investment Management for reliance upon Section 3(c)(5)(C) of the Investment Company Act, the Company will meet the criteria for a company in transition to an excepted business stated in Medidentic Mortgage Investors (available May 23, 1984). Neither the Company nor Holdings is requesting relief with respect to registration under the Investment Company Act.

2 The Company will obtain an opinion of Delaware counsel on the enforceability of the Transfer Restrictions, in such form and substance satisfactory to the Company. The receipt of such opinion will be a condition to the consummation of the Merger.

3 See Doskocil Companies Incorporated (available March 24, 1995); The Presley Companies (available October 8, 1999); PS Group, Inc. (available January 25, 1996).

4 See Kerr-McGee Corporation (available July 31, 2001); AOL Time Warner (available November 11, 2000); Friedman, Billings, Ramsey Group, Inc. (available March 25, 2003).

5 See The Presley Companies (available October 8, 1999); PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995).

6 The Division has previously issued no-action letters in similar circumstances concluding that the successor in a holding company reorganization was permitted to take into account the reporting history of its predecessor in determining whether it satisfies the eligibility requirements for use of Forms S-2, S-3, S-4 and S-8. Champion Home Builders Co. (available September 14, 1987); The North American Coal Corp. (available May 5, 1986).

7 The Division has previously issued no-action letters in similar circumstances concluding that the successor holding company was permitted to look to the reporting history of its predecessor in determining whether it meets the eligibility requirements for use of Forms S-3, S-4 and S-8 after a reorganization which imposed transfer restrictions on the successor's securities. PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995). See also ConocoPhillips (available August 23, 2002); IPC information Systems, Inc. (available May 20, 1999); Russell Corporation (available March 18, 2004) (reaching an identical conclusion where merger created successor holding company but facts of these no-action letters did not involve transfer restrictions).

8 See Doskocil Companies Incorporated (available March 24, 1995).

9 The Division has previously issued no-action letters granting relief under Rule 414 in similar circumstances where a tripartite merger (as will be used in the Reorganization) was used to create a holding company structure. PS Group, Inc. (available January 25, 1996); Varity Corporation (available October 15, 1991); Consolidated Rail Corp. (available March 17, 1993).

10 The Division has previously issued no-action letters in similar circumstances concluding that the successor in a holding company reorganization in which transfer restrictions were imposed on the successor's securities was not required to disclose the information required under Item 10 of Schedule 14A. PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995); The Presley Companies (available October 8, 1999).

11 The Company is relying on Rule 16b-7 under the Exchange Act to exempt from the provisions of Section 16(b) of the Exchange Act the acquisition and disposition by the Company's officers and directors of Holdings Common Stock and the disposition of the Company Common Stock in the Reorganization.

12 The Division has previously issued no-action letters in similar circumstances concluding that parties to a holding company reorganization in which transfer restrictions were imposed on successor securities were not required to disclose on Form 8-K the information regarding the reorganization that was set forth in the Proxy Statement/Prospectus. PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995); The Presley Companies (available October 8, 1999); See also Provident Life and Accident Insurance Company of America (available November 29, 1995) (similar facts, but not involving transfer restrictions).

13 Johnson Controls, Inc. (available January 28, 2005).

14 Securities Act Release No. 6508, note 1 (February 10, 1984).

15 See Preliminary Note to Rule 144.

16 The Division has previously issued no-action letters in similar circumstances concluding that stockholders who received holding company stock in a reorganization were permitted to tack their holding period of the predecessor's stock with their holding period of the successor company's stock. M-Wave, Inc. (available July 30, 1993); Morgan Olmstead, Kennedy & Gardner Capital Corp. (available January 8, 1988)

17 The Division has previously concluded that tacking was permitted for purposes of Rule 144(d) when the reorganization constituted a "recapitalization." El Paso Natural Gas Company (available May 21, 1998); Masada Security Holding, Inc. (available December 5, 2005) (no new holding period under Rule 144(d)(3)(viii) for recapitalization that would be covered by Rule 145(a)); Morgan Olmstead, Kennedy & Gardner Capital Corp. (available January 8, 1988); Securities Act Release 33-6806 note 209 (available October 25, 1988).

18 The Division has previously concluded that tacking was permitted for purposes of Rule 144(d) when there was no change in proportional ownership of the successor holding company and the economic risk of ownership was not affected by the reorganization. Uniface Holdings, B.V. (available August 27, 1993); Monk-Austin, Inc. (available November 19, 1992); L. Perrigo Company (available November 21, 1983); Securities Act Release No. 6099, Questions 33 -34 (available August 2, 1979).

19 The Division has previously issued no-action letters concluding that tacking was permitted for purposes of Rule 144(d) even though the certificate of incorporation of the holding company provided for a classified board of directors, prohibited shareholder action by written vote, established a super majority voting requirement for certain corporate actions and permitted the issuance of "blank check" preferred stock. G&P Financial (December 16, 1997); M-Wave, Inc. (available June 14, 1993). And has also issued no-action letters allowing tacking for purposes of Rule 144(d) even though the certificate of incorporation of the holding company eliminated cumulative voting and changed the manner in which stockholders meetings were called. Ticketmaster Corporation (available May 21,1984).

20 The Division has previously concluded that tacking permitted under Rule 144(d) because changes to certificate of incorporation and by-laws of the holding company were merely "changes of control" provisions. EqualNet Corporation (available February 10, 1995); Bliss and Laughlin Industries (available September 28, 1989).

21 See Bliss and Laughlin Industries (available September 28, 1989); Securities Act Release No. 6099, Question 35 (available August 2, 1979).

22 The Division has previously issued no-action letters in similar circumstances concluding that the successor in a holding company reorganization in which transfer restrictions were imposed on successor securities was considered subject to the reporting requirements of the Exchange Act for purposes of an exemption from the prospectus delivery requirement of Section 4(3) of the Securities Act afforded by Securities Act Rule 174(b). PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995). See also Friedman, Billings, Ramsey Group, Inc. (available March 25, 2003); ConocoPhillips (available August 23, 2002) (same facts, but not involving transfer restrictions).

23 PS Group, Inc. (available January 25, 1996); Doskocil Companies Incorporated (available March 24, 1995); IPC Information Systems, Inc. (available May 20, 1999); The Presley Companies (available October 8, 1999).