SEC Division of Corporation Finance no-action letter: Mrs. Fields Famous Brands, LLC, Mrs. Fields Financing Company, Inc., and Certain Guarantors

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Trust Indenture Act - Exemptive Orders

File No. 22-28772)

Order Granting Application for Exemption: Mrs. Fields Famous Brands, LLC, Mrs. Fields Financing Company, Inc., and Certain Guarantors

March 24, 2005

Mrs. Fields Famous Brands, LLC, Mrs. Fields Financing Company, Inc., and certain guarantors have filed an application under Section 304(d) of the Trust Indenture Act of 1939. In that application, Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and certain guarantors have asked the Commission to exempt from the certificate or opinion delivery requirements of Section 314(d) of the 1939 Act certain provisions of an indenture dated March 16, 2004, as supplemented by an indenture dated February 9, 2005, between Mrs. Fields Famous Brands, Mrs. Fields Financing Company, certain guarantors, and The Bank of New York, as trustee. Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and certain guarantors seek an exemption to the extent that the indenture allows specified dispositions of, and the related release of the indenture's lien with respect to, certain collateral that are made in Mrs. Fields Famous Brands', Mrs. Fields Financing Company's, and the guarantors' ordinary course of business. A description of the indenture and the basis for the request is more fully set forth in the application from Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors dated January 26, 2005. That application is on file in the Commission's Public Reference Section, File No. 22-28772, 450 Fifth Street, NW, Washington, DC 20549.

It appears to the Commission, upon consideration of the application and the indenture, that a conditional exemption from the requirements of Section 314(d) of the 1939 Act is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the 1939 Act. In this regard, among other things:

the indenture permits Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors to dispose of collateral in the ordinary course of their business and have the collateral released from the indenture's lien;

Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors will deliver to the trustee annual consolidated financial statements audited by certified independent accountants; and

Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors will deliver to the trustee a semi-annual certificate stating that all dispositions of collateral during the relevant six-month period occurred in Mrs. Fields Famous Brands', Mrs. Fields Financing Company's, and the guarantors' ordinary course of business and that all of the proceeds were used as permitted by the indenture.

The Commission issued a notice on February 17, 2005 giving interested persons until March 18, 2005 to request a hearing on the application. As of March 24, 2005, there have been no requests for a hearing on the application.

IT IS ORDERED that the provisions of the indenture governing specified dispositions of collateral and releases of the collateral from the indenture's lien that are made in Mrs. Fields Famous Brands', Mrs. Fields Financing Company's, and the guarantors' ordinary course of business shall be, and the same are, conditionally exempted from the certificate or opinion delivery provisions of Section 314(d) of the 1939 Act.

For the Commission, by the Division of Corporation Finance, pursuant to delegated authority.

Margaret H. McFarland Deputy Secretary

(File No. 22-28772)

Application and Opportunity for Hearing: Mrs. Fields Famous Brands, LLC, Mrs. Fields Financing Company, Inc., and Certain Guarantors

February 17, 2005

The Securities and Exchange Commission gives notice that Mrs. Fields Famous Brands, LLC, Mrs. Fields Financing Company, Inc., and certain guarantors have filed an application under Section 304(d) of the Trust Indenture Act of 1939. Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and certain guarantors ask the Commission to exempt from the certificate or opinion delivery requirements of Section 314(d) of the 1939 Act certain provisions of an indenture dated March 16, 2004, as supplemented by an indenture dated February 9, 2005, between Mrs. Fields Famous Brands, Mrs. Fields Financing Company, certain guarantors, and The Bank of New York, as trustee. The indenture relates to 11-1/2% Senior Secured Notes due 2011 and 9% Senior Secured Notes due 2011.

Section 304(d) of the 1939 Act, in part, authorizes the Commission to exempt conditionally or unconditionally any indenture from one or more provisions of the 1939 Act. The Commission may provide an exemption under Section 304(d) if it finds that the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the 1939 Act.

Section 314(d) requires the obligor to furnish to the indenture trustee certificates or opinions of fair value from an engineer, appraiser or other expert upon any release of collateral from the lien of the indenture. The engineer, appraiser or other expert must opine that the proposed release will not impair the security under the indenture in contravention of the provisions of the indenture. The application requests an exemption from Section 314(d) for specified dispositions of collateral that are made in Mrs. Fields Famous Brands', Mrs. Fields Financing Company's, and the guarantors' ordinary course of business.

In its application, Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors allege that:

the indenture permits Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors to dispose of collateral in the ordinary course of their business;

Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors will deliver to the trustee annual consolidated financial statements audited by certified independent accountants; and

Mrs. Fields Famous Brands, Mrs. Fields Financing Company, and the guarantors will deliver to the trustee a semi-annual certificate stating that all dispositions of collateral during the relevant six-month period occurred in Mrs. Fields Famous Brands', Mrs. Fields Financing Company's, and the guarantors' ordinary course of business and that all of the proceeds were used as permitted by the indenture.

Any interested persons should look to the application for a more detailed statement of the asserted matters of fact and law. The application is on file in the Commission's Public Reference Section, File Number 22-28772, 450 Fifth Street, NW, Washington, DC 20549.

The Commission also gives notice that any interested persons may request, in writing, that a hearing be held on this matter. Interested persons must submit those requests to the Commission no later than March 18, 2005. Interested persons must include the following in their request for a hearing on this matter:

the nature of that person's interest;

the reasons for the request; and

the issues of law or fact raised by the application that the interested person desires to refute or request a hearing on.

The interested person should address this request for a hearing to: Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,

Washington, DC 20549-0609. At any time after March 18, 2005, the Commission may issue an order granting the application, unless the Commission orders a hearing.

For the Commission, by the Division of Corporation Finance, pursuant to delegated authority.

Margaret H. McFarland Deputy Secretary

Incoming Letter:

January 26, 2005

Director Division of Corporation Finance Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549

Re:

Application for Exemption Pursuant to Section 304(d) of the Trust Indenture Act of 1939, as Amended

Ladies and Gentlemen:

Mrs. Fields Famous Brands, LLC (the "Company"), Mrs. Fields Financing Company, Inc. ("MFFC" and, together with the Company, the "Issuers") and the Subsidiary Guarantors (as hereinafter defined) hereby request, pursuant to Section 304(d) of the Trust Indenture Act of 1939, as amended (the "TIA"), that the Director of the Division of Corporation Finance (the "Director") of the Securities and Exchange Commission (the "Commission"), issue an order exempting from the provisions of Section 314(d) of the TIA certain dispositions of collateral made in accordance with the terms of (1) the Indenture, dated as of March 16, 2004, and as to be amended by the First Supplemental Indenture (as amended, the "Indenture"), by and among the Issuers, the subsidiary guarantors named therein (the "Subsidiary Guarantors") and The Bank of New York, as trustee (the "Trustee"), under which the Issuers have issued (i) $115,000,000 aggregate principal amount of 11-1/2% Senior Secured Notes due 2011 (the "11-1/2% Notes") and (ii) $80,747,000 aggregate principal amount of 9% Senior Secured Notes due 2011 (the "9% Notes" and, together with the 11-1/2% Notes, the "Notes"), (2) the Security Agreement, dated as of March 16, 2004 (the "Security Agreement"), by and among the Issuers, the Subsidiary Guarantors and the Trustee, (3) the Trademark Security Agreement, dated as of March 16, 2004 (the "Trademark Security Agreement"), by and among Great American Cookie Company Franchising, LLC, Pretzelmaker Franchising, LLC, Pretzel Time Franchising, LLC, TCBY Systems, LLC ("TCBY") and The Mrs. Field's Brand, Inc., each of which is a Subsidiary Guarantor, and the Trustee, (4) the Account Control Agreement, dated as of March 16, 2004 (the "LaSalle Control Agreement"), by and among the Trustee, LaSalle Bank, National Association and the Company, (5) the Restricted Account Agreement, dated as of March 16, 2004 (the "Company Control Agreement"), by and among the Trustee, Wells Fargo Bank, N.A. and the Company, (6) the Restricted Account Agreement, dated as of March 16, 2004 (the "TCBY Control Agreement" and, together with the Company Control Agreement and the LaSalle Control Agreement, collectively, the "Control Agreements") by and among the Trustee, Wells Fargo and TCBY, (7) the Deed to Secure Debt, Security Agreement, and Assignment of Leases and Rent, dated as of March 16, 2004 (the "Mortgage"), by and between Great American Manufacturing, LLC, a Subsidiary Guarantor, as grantor, and the Trustee and (8) the Pledge Agreement, dated as of March 16, 2004 (the "Pledge Agreement" and, together with the Security Agreement, the Trademark Security Agreement, the Control Agreements, the Mortgage and such other collateral agreements that may be entered into as contemplated by the Indenture, collectively, the "Collateral Agreements"), by and among the Company and TCBY and the Trustee. Copies of the Indenture and the existing Collateral Agreements are enclosed with this application.

BACKGROUND

On March 16, 2004, the Issuers issued 11-1/2% Senior Secured Notes due 2011 (the "Original 11-1/2% Notes") and 9% Senior Secured Notes due 2011 (the "Original 9% Notes, and together with the Original 11-1/2% Notes, the "Original Notes") in reliance upon exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act"). In accordance with their obligations under registration rights agreements with respect to the Original Notes, on August 24, 2004, the Issuers and the Subsidiary Guarantors completed an exchange offer under which it issued the 11-1/2 % Notes in exchange for the Original 11-1/2% Notes and the 9% Notes in exchange for the 9% Original Notes, in each case with terms identical to the Original 11-1/2% Notes or the Original 9% Notes, respectively, in all material respects, except that the Notes have been registered under the Securities Act and, therefore, are not be subject to the transfer restrictions and registration rights relating to the Original Notes. The 11-1/2% Notes and the 9% Notes are secured ratably, among other things, by (i) substantially all of the Issuers' and the Subsidiary Guarantors' tangible and intangible assets (other than leasehold interests in real property) and (ii) a pledge of all or a portion of the equity interests of MFFC and the Subsidiary Guarantors. The Notes are contractually senior in right of payment to any of the Issuers' existing and future subordinated indebtedness.

The Company is one of the largest franchisors in the premium snack-food industry, featuring Mrs. Fields, Great American Cookie Company, TCBY, Pretzel Time and Pretzelmaker as its core brands. The Company also markets a variety of freshly baked cookies, brownies, candies and other gift items under its Mrs. Fields brand name on the Internet and through gift catalogs. In addition, the Company operates a batter facility in Atlanta, Georgia to produce its proprietary batter for its Great American Cookie Company brand retail stores. The Company was formed immediately before the issuance of the Notes, at which time its immediate parent company, Mrs. Fields' Original Cookies, Inc., contributed to the Company all of its interests in TCBY, Mrs. Fields Cookies Australia and Mrs. Fields Gifts, Inc. (which operates the gifts business) and contributed to the Company or newly-formed brand-specific subsidiaries of the Company the intellectual property and licensing and franchising assets and specified liabilities of each of the Mrs. Fields, Great American Cookie Company, Original Cookie Company, Pretzel Time, Pretzelmaker and Hot Sam brands as well as the Great American batter facility. MFFC is a wholly-owned subsidiary of the Company, newly-formed in connection with the issuance of the Notes for the sole purpose of being the co-issuer of the Notes.

Generally, Section 314(d)(1) of the TIA requires the delivery of certain certificates and opinions in connection with obtaining the release of collateral subject to the lien of an indenture. Each release of collateral that is subject to the lien of an indenture requires the obligor to deliver to the indenture trustee a certificate or opinion from an engineer, appraiser or other expert as to the fair value of the collateral to be released, and to include a statement that, in the opinion of the person delivering the certificate or opinion, the proposed release will not impair the security under the indenture in violation of the indenture's terms. Furthermore, the certificate or opinion must be delivered by an independent expert if the fair value of such collateral and of all other property released since the commencement of the then-current calendar year is equal to or greater than 10% of the aggregate principal amount of the indenture securities at the time outstanding.

Section 12.03(c) of the Indenture provides for the Issuers' and the Subsidiary Guarantors' compliance with the requirements of Section 314(d)(1) of the TIA in connection with the release of property or securities from the lien of the Indenture and the Collateral Agreements. Section 12.03(c) of the Indenture further provides that neither the Issuers nor the Subsidiary Guarantors shall be required to comply with Section 12.03(c) in respect of transactions undertaken pursuant to Section 12.04(c), provided that the Issuers and the Subsidiary Guarantors deliver to the Trustee semi-annually a certificate to the effect that all of the transactions undertaken by the Company and the Subsidiary Guarantors pursuant to Section 12.04(c) during the previous six months were in the ordinary course of business and that all proceeds therefrom were used by the Company or such Subsidiary Guarantor as permitted by the Indenture and the Collateral Agreements.

Section 12.04(c) of the Indenture provides that:

"As long as the Issuers and the Guarantors are in compliance with the provisions of Section 12.04(a) hereof, the Issuers and the Guarantors may, pursuant to and in accordance with this Indenture and the Collateral Agreements, without requesting the release or consent of the Trustee:

sell or dispose of in the ordinary course of business free from the Liens granted under the Collateral Agreements, any machinery, equipment, furniture, apparatus, tools or implements, materials or supplies or other similar property ("Subject Property") which, in its reasonable opinion, may have become obsolete, worn-out, surplus or no longer used in the conduct of its businesses or the operation granted under the Collateral upon replacing the same with, or substituting for the same, new Subject Property constituting Collateral not necessarily of the same character but being of at least equal value and utility as the Subject Property so disposed of as long as such new Subject Property becomes subject to the Liens granted under the Collateral Agreements, which new subject Property shall without further action become Collateral subject to the Liens granted under the Collateral Agreements;

abandon, sell, assign, transfer, license or otherwise dispose of in the ordinary course of business any personal property the use of which is no longer necessary or desirable in the proper conduct of the business of the Issuers and the maintenance of its earnings and is not material to the conduct of the business of the Issuers and their Subsidiaries taken as a whole;

[intentionally omitted];

sell, transfer or otherwise dispose of inventory in the ordinary course of business;

sell, collect, liquidate, factor or otherwise dispose of Accounts (as defined in the Security Agreement) and accounts receivable in the ordinary course of business; and

make cash payments (including for the scheduled repayment of Indebtedness) from cash that is at any time granted under the Collateral in the ordinary course of business that are not otherwise prohibited by this Indenture and the Collateral Agreements."

In addition, pursuant to Section 4.23 of the Indenture, the Issuers are required to furnish to the Trustee, and upon request to the holders of the Notes, all of the Company's consolidated quarterly and annual financial statements meeting the requirements imposed on reporting companies under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, whether or not the Company is then a reporting company.

DISCUSSION

The TIA was adopted to protect the purchasers of publicly offered debt securities from certain abusive practices. In particular, the release provisions of the TIA were added to prevent abuses such as those described in Hazzard v. Chase National Bank, 159 Misc. 57, 287 N.Y.S. 54 (Sup. Ct. 1936), aff'd, 257 App. Div. 950, 14 N.Y.S.2d 147 (1939), aff'd, 282 N.Y. 652, 26 N.E.2d 801, cert. denied, 311 U.S. 708 (1940). In Hazzard, the court found that the substitution of property of lesser value for the property initially subject to the lien of the indenture reduced the debt holder's security and, therefore, constituted an abuse.

Allowing the release of certain collateral without requiring compliance with the provisions of Section 314(d) of the TIA, as provided in Sections 12.03 and 12.04 of the Indenture, would not lead to the abuses described above, nor would requiring such compliance further the interests of the holders of the Notes or the purposes of the TIA given the conditions required for the permitted releases. In recognition of this by the Staff, exemptive orders have been granted and no-action positions have been taken in connection with a number of indentures containing substantially similar provisions as those described in Section 12.04 of the Indenture. See Algoma Steel Inc. (order granted December 23, 2002); Arch Wireless Holdings, Inc. (letter available May 24, 2002); Allied Waste North America, Inc. (order granted August 8, 2001); Federated Department Stores, Inc. (letter available January 31, 1992); New World Entertainment, Ltd. (letter available May 31, 1988); Jack Eckerd Corp. (letter available February 5, 1991); Monogram Models, Inc. (letter available October 1, 1987); Mary Kay Cosmetics, Inc. (letter available June 17, 1986).

In the exemption applications and no-action letter requests listed above, the issuer regularly sold inventory, collected customer receivables or engaged in other limited activities that resulted in releases of collateral in the ordinary course. Given the volume of such transactions, the issuer obtained relief from the requirements of Section 314(d) because the compliance therewith for such transactions would be impractical and prohibitively expensive and would impair the issuer's ability to operate its business efficiently in the ordinary course. In lieu of the certificate requirements of Section 314(d), the issuer in each of the exemption applications and no-action letter requests listed above agreed to (i) deliver a certificate to the trustee generally confirming that all dispositions of collateral in the previous six months were in the ordinary course of the issuer's business and that the proceeds therefrom had been used in the issuer's business or to make payments on the indenture securities or as otherwise permitted by the indenture and the related documents and (ii) deliver annual audited financial statements to the trustee.

Consistent with these exemption applications and no-action letters, Section 12.04(a) of the Indenture requires the Issuers and the Subsidiary Guarantors to deliver to the Trustee within 15 days following each June 30 and December 31 a certificate signed by two officers to the effect that all of the transactions undertaken by the Issuers and the Subsidiary Guarantors pursuant to Section 12.04(c) during the preceding semi-annual period were in the ordinary course of business and that all proceeds therefrom were used by the Issuers or such Subsidiary Guarantors as permitted by the Indenture and the Collateral Agreements. If the Issuer and the Subsidiary Guarantors fail to provide the Trustee such semi-annual certificate, the Indenture protects the holders of the Notes by, in effect, reinstating the requirements of Section 314(d)(1) of the TIA as to the release of collateral. Furthermore, Section 4.23 requires the Issuers to deliver to the Trustee consolidated quarterly and annual financial information.

Section 12.04(b) of the Indenture also provides that the fair value of the collateral released pursuant to Section 12.04(c) of the Indenture is not to be considered in determining whether the aggregate fair value of the collateral released in any calendar year exceeds the 10% threshold specified in Section 314(d)(1) of the TIA. With respect to Section 12.04(c) of the Indenture, the exclusion is necessary given that the Company and the Subsidiary Guarantors sell inventory and collect accounts receivables on a daily basis in the ordinary course of business and if the disposition and/or collection of such collateral were counted for purposes of the 10% threshold test, the Company and the Subsidiary Guarantors would, as a practical matter, not have the benefit of the threshold. Given the Company's and the Subsidiary Guarantors' level of activity in the sale of inventory and collection of receivables, the 10% threshold (which currently is approximately $11.5 million in respect of the 11-1/2% Notes and $8 million in respect of the 9% Notes) would likely be reached soon after the beginning of each calendar year. Thereafter, each release of any collateral that equaled or exceeded the greater of $25,000 or 1% of the outstanding principal amount of either of the 11-1/2% Notes or the 9% Notes, even if such release would otherwise be exempt from the requirement to deliver an opinion or certificate of an independent engineer, appraiser or other expert, would have to comply with such delivery requirements.

Without the relief requested herein, the Company and the Subsidiary Guarantors could not operate their business in the ordinary course. As noted in the Federated no-action letter, the implementation of a mechanism to furnish the necessary certificates and opinions for dispositions of collateral in the ordinary course would be unwieldy and prohibitively expensive. For example, as part of the gifts business and the Great American Cookie batter manufacturing business, the Company and the Subsidiary Guarantors sell inventory and collect accounts receivables on a daily basis. If the Issuers and the Subsidiary Guarantors were required to deliver a certificate for each such disposition, their business would be adversely affected, which would, in turn, adversely affect the collateral of the holder of the Notes. Such burdens on the Company and the Subsidiary Guarantors are unnecessary for the protection of the holders of the Notes. Accordingly, Section 12.04 is essential to allow the Company and the Subsidiary Guarantors to operate their business in the ordinary course.

In order to ensure that Section 12.04 does not lead to abuse by the Issuers or the Subsidiary Guarantors, the Issuers' and the Subsidiary Guarantors' right to rely on Sections 12.04(b) and 12.04(c) of the Indenture is conditioned upon the Issuers and the Subsidiary Guarantors having furnished to the Trustee all certificates then required by Section 12.04(a) of the Indenture. Furthermore, Section 12.04 applies only to transactions in the ordinary course of business, and, as a result, dispositions of collateral that are not in the ordinary course of business would require separate certificates or opinions of fair value in accordance with Section 314(d) of the TIA. The Indenture also provides other substantial protections to the holders of the Notes by including various restrictive covenants. These protections include, among others, limitations on entering into transactions with affiliates (Section 4.17), incurring additional indebtedness (Section 4.08), selling assets (Section 4.13) and making restricted payments (Section 4.10).

Finally, the Issuers and the Subsidiary Guarantors represent that the Indenture and the Collateral Agreements contain provisions under which the Issuers and the Subsidiary Guarantors have agreed not to undertake specified extraordinary transactions affecting the collateral that might work to the detriment of the holders of the Notes in contravention of the Indenture.

CONCLUSION

Section 304(d) of the TIA permits the Commission, upon its own motion or by order on application by an interested person, to "exempt conditionally or unconditionally any person, registration statement, indenture, security or transaction, or any class or classes of persons, registration statements, indentures, securities, or transactions, from any one or more of the provisions of this title, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by this title." As set forth in Release No. 39-2263 (effective May 15, 1991), the Commission has delegated to the Director the authority to issue orders granting exemptive relief pursuant to Section 304(d) of the TIA.

We respectfully request that the Director grant an order exempting dispositions of collateral made in accordance with Section 12.04 of the Indenture from the requirements of Section 314(d) of the TIA because, as discussed more fully above, (1) such requirements would be impractical and prohibitively expensive in the case of dispositions of collateral by the Issuers and the Subsidiary Guarantors in the ordinary course of business and would adversely affect the Issuers' and the Subsidiary Guarantors' ability to conduct their business in an efficient manner, and (2) in light of the conditions required for releases permitted by Section 12.04 and the other protections contained in the Indenture, the imposition of such requirements would not be necessary for the protection of investors and would not serve the public interest or the purposes of the TIA.

Pursuant to Rule 4d-7(a) under the TIA, we have enclosed three copies of this application, one of which has been manually signed by the undersigned, a duly authorized officer of the Issuers and the Subsidiary Guarantors.

If the Director is not inclined to respond favorably to this request, we would appreciate the opportunity to discuss the Director's concerns prior to any written response to this letter. If you need additional information with respect to the matters set forth herein, please contact Randall H. Doud of Skadden, Arps, Slate, Meagher & Flom LLP at (212) 735-2524.

Respectfully submitted,

MRS. FIELDS FAMOUS BRANDS, LLC MRS. FIELDS FINANCING COMPANY, INC. GREAT AMERICAN COOKIE COMPANY FRANCHISING, LLC MRS. FIELDS FRANCHISING, LLC PRETZEL TIME FRANCHISING, LLC PRETZELMAKER FRANCHISING, LLC TCBY SYSTEMS, LLC MRS. FIELDS GIFTS, INC. THE MRS. FIELDS' BRAND, INC. GREAT AMERICAN MANUFACTURING, LLC MRS. FIELDS COOKIES AUSTRALIA TCBY INTERNATIONAL, INC. TCBY OF TEXAS, INC.

By: _________________________ Name: Michael R. Ward Title: Executive Vice President, General Counsel and Secretary

Enclosures

cc: Randall H. Doud - Skadden, Arps, Slate, Meagher & Flom LLP

http://www.sec.gov/divisions/corpfin/cf-noaction/fields032405.htm

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Modified: 05/25/2005