SEC Division of Investment Management staff letter: Robertson, Stephens & Company — SEC — US

.~.-~~

JAM 12_
P..BLI
Our Ref. No. 92-669-CC

Robertson, Stephens &
RESPONSE OF THE OFFICE OF CHIEF COUNSEL Company DIVISION OF INVESTMENT MAAGEMENT File No. 8-23192 By letter dated January 8, 1993, you request assurance that

the staff would not recommend enforcement action to the

Commission under the Investment Company Act of 1940 (the "1940

Act") if, as more fully described in your letter, Robertson,

Stephens & Company ("Robertson Stephens") implements a custodial

receipt program involving cumulative convertible preferred stock

(the "Preferred Stock") without registering the program as an

investment company under the Investment Company Act.

Your letter states that approximately seven issuers would

privately place substantially identical Preferred Stock with a

group primarily composed of institutional investors. ii Each

issuer participating in the custodial receipt program would be a

company with a publicly traded class of securities registered

under Section 12 of the Exchange Act. The Preferred Stock would

be offered together such that each purchaser in the private

placement would purchase Preferred Stock issued by each issuer in

the program in proportion to the aggregate face amount of the

Preferred Stock sold by the issuer through the program. Each

share of Preferred Stock would be convertible at any time at the

option of the holder into the common stock of the issuer of the

Preferred Stock. Al though the shares of Preferred Stock would be

offered together, holders could break up the package, and sell or

convert individual shares, at any time.

Each Preferred Stock would automatically convert into the

common stock of its issuer if, at any time after three years and

prior to six years from the date of issuance of the Preferred

Stock, the weighted average per-share market price of the common

stock of the participating issuers increased to at least 125% of

the weighted average per-share conversion price. After six years

from the date of issuance of the Preferred Stock, each issuer's

Preferred Stock would convert into common stock of its issuer if

the per-share market price of that particular issuer's common

ii You state that the debentures would be issued in a private placement exempt from registration pursuant to Section 4 (2) of the Securities Act of 1933 (the "1933 Act"). We provide

no opinion as to whether the terms of the placement you

describe would conform to the requirements of Section 4 (2) .

stock exceeded 125% of the conversion price of that issuer's

Pref erred stock.
The Preferred stock issued pursuant to the program would be deposi ted with a commercial bank serving as a custodian, which would issue to each investor a receipt or receipts. Each receipt

would represent at least one particularly identified share, or

fraction thereof, of Preferred stock issued by each of the

participants in the program, and in no event would more than one

investor have an ownership interest in any share, or fraction

thereof, of Preferred stock. Each investor would be free at any

time to present its receipts to the custodian and receive in

exchange the corresponding Preferred stock. A holder of the

Preferred stock represented by a receipt would in all respects

have the same rights as would a holder of the receipt. The

automatic conversion features of the Preferred stock would apply

whether or not the Preferred stock had been removed from the

receipt program and individual shares sold or converted by a

holder.
The Preferred stock would be transferable primarily under

the terms of rule 144A under the 1933 Act. Transfer of the

receipts also would take place primarily under the terms of rule

144A.
The role of the custodian with respect to the program would

be purely ministerial. The primary duties of the custodian would

be to hold the Preferred stock and to maintain records of the

holder of each receipt and the Preferred stock underlying each

receipt. The custodian would also act as transfer agent to

stock. It might also act as a conduit for payments to holders of

the Preferred stock. The custodian also might be used as a

conduit for delivery of the shares issued upon conversion of

Preferred stock to the holders of the Preferred stock.

On the basis of the facts and representations contained in

your letter, we would not recommend enforcement action to the

Commission under the 1940 Act if Robertson Stephens implements

the custodial receipt program described in your letter without

registering it as an investment company. This conclusion is

based in particular on your representations that: 1) each receipt

will represent the entire and undivided ownership interest in

discrete underlying shares of Preferred Stock, and holders of

receipts will be permitted to withdraw the underlying Preferred

stock from the receipt program at any time, subject to no more

than a moderate transaction fee; ~I 2) after withdrawing shares

~I Telephone conversation between Gregory Priest, counsel for Robertson Stephens, and the undersigned on December 29,

(continued. . . )

of Preferred stock from the receipt program, owners will be able

to sell or convert individual shares of Preferred stock at any

time; 3) each holder's ownership interest in particular shares of

Preferred stock will be identified and recorded by the custodian;

4) each holder will have the right, upon default in paYment or

other default on one or more of the underlying shares of

Preferred stock, to proceed directly and individually against the

issuer of the shares represented by the receipt, and is not

required to act in concert with other holders or with the

custodian; 5) the custodian will perform only clerical or

ministerial services in connection with the program; 6) the

custodian will undertake to notify receipt holders in the event

of a default with respect to the Preferred stock, and to forward

to receipt holders copies of all communications relating to any

default with respect to a share of Preferred stock; 7) the

Preferred stock underlying the receipt will not be considered the

assets of the custodian or of Robertson Stephens; and 8) the

custodian will be a bank. dl

Our position is based particularly on the representations

and undertakings set forth above. Because this position is based

on the facts and representations in your letter, you should note

that any different facts or representations may require a

different conclusion. Further, we emphasize that this response

expresses the Division's position on enforcement action only, and

does not purport to express any legal conclusions on the

questions presented or acceptance of your legal analysis. In

particular, we believe that the receipts created by the program

may be separate securities under the Securities Act of 1933.

We have considered your request for confidential treatment

of your letter and our response for a period of 60 days from the

date of our response. ~I We have determined that your request is

reasonable and appropriate under 17 CFR 200.81 (b). Accordingly,

your letter and our response will not be made pUblic until the

earlier of March 13, 1993 or the date that information regarding

~I ( . . . continued) 1992. dl Compare CRT Government Securities, Ltd. (pub. avail. Aug. 4,

1992); Bear Stearns & Co., Inc. (pub. avail. Jan. 28, 1992);

Merrill Lynch, Pierce, Fenner & Smith Inc. (pub. avail.

Sept. 6, 1990).

~I In a telephone conversation with the undersigned on January

12, 1993, Gregory Priest, counsel for Robertson Stephens,

stated that Robertson Stephens requested that its letter and

the staff's response be given confidential treatment for 60

days, and not for the 120 days requested in Robertson

Stephens' no-action request.

4 the proposed transaction is made public in any fashion. Please

inform this office immediately if information regarding the

program is made public in any fashion prior to the expiration of

the 60 day period.

c: ß7/~~

Eli Nathans

special Counsel

WILSON, SONSINI, GOODRICH & ROSATI PROFESSIONAL CORPORATION )- ILLl- I Y".~ /19 3

Two PAW AL SQUAR
PALO ALTO, CALFORN 94306
FACSIMILE, 141S1 493-6811 TELEPHONE'14151493-9300 JOHN ARNOT WILSON COUNSEL ACT /AfUdS,íhtft(
SECTION '3 C¿;)
¿;c;;! ,o/11t (LI /fCr
Investment Company
Act of 1940-
RULE Section 3
PUBLIC
AVAILABILIT ",anuary 8, 1993
VI .BDBRA BXPRB88

Thomas S. Harman

Associate Director and General Counsel

Division of Investment Management

Securities and Exchange Commission

450 5th Street, N.W.

Judiciary Plaza

Washington, DC 20549

ae: Bo-action aequest concerning BioBonus- Proqraa - Confidential Treataent Reqested, original Letter Dated

Bovemer 13, 1992, 8uppl..ental Letter Dated Decemer 18. 1992

Dear Mr. Harman:

As we discussed with you in our telephone conversation

earlier today, we are writing on behalf of our client Robertson,

Stephens & Company ("RS&Co") and the Issuers (as defined below)

in a proposed convertible preferred stock program (the "BioBonus.

Program") to provide you information relating to certain changes

to the BioBonus. Program from the description provided in our

original letter to you of November 13, 1992 (the "original

Letter") and our supplemental letter to you of December 18, 1992

(the "Supplemental Letter" and, together with the Original

Letter, the "Previous Letters").

As we discussed in the above-referenced telephone

conversation, in response to concerns expressed by the Staff of

the Division of Investment Management (the "Staff"), we are

modifying the BioBonus. Program to eliminate the requirements,

discussed in the Previous Letters, that for six years following

the closing of the sale of the Preferred (as defined below) a

holder may not convert or sell one Issuer's Preferred without

simul taneously converting or selling a proportionate amount of

each other Issuer's Preferred. Accordingly, there will be no

restrictions on a holder's ability to convert or sell shares of

one Issuer's Preferred either alone or along with the shares of

the other Issuers' Preferred (subject to compliance with

applicable securities laws).

'f'ILSON,: 50NSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

You have also requested that we provide a complete

restatement of the terms of the BioBonus. Program as described in

the Previous Letters and modified as described above, and our

legal analysis of the issues raised by the proposed structure.

In this letter, we have therefore provided a restated description

of the BioBonus. Program and our legal analysis of the issues

under the Investment Company Act of 1940, as amended (the

"Investment Company Act") raised by the BioBonus. Program. The

description of the BioBonus. Program and the legal analysis in

this letter therefore supersede the description and analysis in

the Previous Letters.

We respectfully request that you confirm that the Division

of Investment Management will not recommend that the Commission

take any enforcement action under the Investment Company Act

against RS&Co, any Issuer or any other person or entity if the

BioBonus. Program (in the revised form described in this letter)

is implemented without any registration of an investment company

under the Investment Company Act.

The BioBonus. Proqr..

Issuers participating in the BioBonus. Program would issue

in private placements primarily to institutional investors

cumulative convertible preferred stock (the "Preferred"). RS&Co,

a registered broker-dealer under Section 15 (b) of the Securities

Exchange Act of 1934, as amended (the "Exchange Act"), would act

as best efforts private placement agent in connection with the

sale of the Preferred. Addi tional registered broker-dealers may

also act as placement agents. The Preferred would be deposited

with a commercial bank as custodian (the "CUstodian") that would

issue depositary receipts (the "Receipts") to each investor.

RS&Co anticipates that approximately seven issuers (the

"Issuers") would participate in the BioBonus. Program by

privately placing varying amounts of Preferred (approximately $20

to $40 million per Issuer) and that the aggregate amount raised

in the private placements would be approximately $200 to $250

million. Each Issuer participating in the BioBonus. Program

would be a company with a publicly-traded class of securities registered under Section 12 of the Exchange Act. Each Issuer would issue substantially identical Preferred in private

placements to a group primarily composed of institutional

investors. The Preferred would be offered together such that

each purchaser in the private placement would purchase Preferred

issued by each Issuer in the BioBonus. Program in proportion to

the aggregate amount of Preferred sold by such Issuer. Thus, for

example, if the amount of Preferred issued by one participating

Issuer consti tuted twelve percent of the total amount of

Preferred issued pursuant to the BioBonus. Program, twelve

GM2FU.R2(5P3)
01/08/93

, ,
WnSON, 80NSINI, GOODRICH & ROSATI

Mr. Thomas S. Harman

percent of each investor's purchase would consist of that

Issuer's Preferred.

As a convenience for holders of the Preferred, the Preferred

issued pursuant to the BioBonus. Program could in the investor's

discretion be deposited with the CUstodian, which would issue to

each investor a Receipt or Receipts. Each Receipt would

represent at least one particular identified Preferred

certificate issued by each of the participats in the BioBonus.

Program, and in no event would a Receipt evidence a partial

interest in any particular Preferred certificate. Each investor

would be free at any time to present its Receipt(s) to the

CUstodian and receive in exchange the specific corresponding

Preferred certificates, and a holder of a Receipt would in all

respects have the same rights as would a holder of the underlying

Preferred represented by the Receipt.

The role of the CUstodian with respect to the BioBonus.

Program would be purely ministerial. The primary duties of the

CUstodian would be to hold the Preferred and to maintain records

of the holder of each Receipt and of the Preferred underlying

such Receipt. The CUstodian would also act as transfer agent to

underlying Preferred. It is possible that, for administrative

convenience, the CUstodian would also be designated as paying

agent for the issuers of the Preferred. In such role, the

Custodian would act as a conduit for payments of dividends to the

holders of the Preferred by receiving cash from each Issuer in

trust for holders of the Preferred on each date for the payment

of dividends and would immediately disburse such cash to the

holders of the underlying Preferred as provided in the terms of

the Certificate of Designation of Rights, Preferences, Privileges

and Restrictions (the "Certificate of Designation") with respect

to each Preferred that the Issuer of such Preferred would file

with the secretary of state of its jurisdiction of incorporation.

This role would be administrative only. Upon conversion of the

Preferred, the CUstodian may be used as a conduit between the

Issuers and the holders of the Preferred for the delivery of securi ties issuable upon conversion of the Preferred to the holders of such Preferred.

Each Issuer would authorize its Preferred pursuant to the

terms of a separate Certificate of Designation defining the

rights, preferences and privileges of that Issuer's Preferred.

Each Preferred issued by a participating Issuer in the BioBonus.

Program would be substantially identical to each other Preferred,

with the exception that each Preferred would be solely the

obligation of, and be convertible into the Common stock of, its

Issuer. Each Preferred would be convertible at any time at the

option of the holder into the common stock of the Issuer of that

GM2FU.R2(5P3)
01/08/93

y'JILSON, SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

Preferred. In addition, each Preferred would automatically

convert into Common stock of its Issuer if, at any time after

three years and prior to six years from the date of issuance of

the Preferred, the weighted average Per-share market price of the

common stock of the participating Issuers (such weighting to be

performed based upon the amount of Preferred issued by each

Issuer) increased to at least 125% of the level of the weighted

average Per-share conversion price. For example, if the

aggreqate conversion price of a basket including a proportionate

numer of shares of common stock of each of the participating

Issuers were $1,000, and subsequent to three years following the

issuance of the Preferred the aggregate value of the basket of

shares of common stock exceeded $1,250, then at that point all of

the Preferred would automatically convert into the common stock

of their respective Issuers. After six years from the date of

issuance of the Preferred, each Issuer's Preferred would convert

into the common stock of its Issuer if the per-share market price

of that particular Issuer's common stock exceeded 125% of the

conversion price of that Issuer's Preferred.

Resales of the Preferred and the Receipts would be

accomplished primarily through Rule l44A. Each Issuer would

covenant with the purchasers of its Preferred to make available

information about such Issuer necessary to make Rule 144A

available to holders of the Preferred for resales of the

Preferred and the Receipts representing the Preferred to

qualified institutional buyers, subject to the limitations on

such resales discussed below.

Because the Preferred would be offered privately primarily

to institutions, RS&Co does not anticipate that the initial

numer of holders would exceed lOO. However, trading of the

Preferred under Rule l44A could result in the numer of holders

of Preferred at a particular point subsequent to the initial

private placement aggregating more than 100. Because RS&Co

believes that investors would have concerns about artificial

limits on the ability of a holder of Preferred to resell such

Preferred in reliance on Rule 144A, the BioBonus. Program as

currently contemplated could not be operated in reliance on the

exemption from registration under the Investment Company Act set forth in Section 3 (c) (1) thereof. Leqal Analysis

In three recent no-action letters, the Division of

Investment Management (the "Division") has applied substantially

identical analyses to the question whether programs similar to

the BioBonus. Program required registration of an entity pursuant

~ to the Investment Company Act. See CRT Government Securities,

Ltd. (available August 4, 1992): Bear, Stearns & Co., Inc.

GM2FU.R2(5P3)

01/08/93

"\VILSON. SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

(available January 28, 1992); and Merrill LYnch, Pierce, Fenner &

Smith Incorporated (available Septemer 6, 1990).

Each of these letters also requested the confirmation of the

Division of Corporation Finance that the instruents involved

could be issued without registration under the Securities Act of

1933, as amended (the "Securities Act"). As the Preferred

involved in the BioBonus. Program would be issued in private

placements exempt from registration pursuant to Section 4 (2) of

the Securities Act, we are not requesting any such confirmtion.

In each of the above-referenced letters, the response of the

Commission's Staff focused primarily on the three factors that

are discussed below:

Each Holder of a Recei~t Must Have all of the Rights

and Pri vileaes of a Holder of the Preferred.

As discussed above, the Receipts represent a

convenience only. Each holder of a Receipt would have precisely

the same rights and privileges as a holder of the Preferred that

underlie the Receipt, and a holder of a Receipt would have no

rights in addition to those of a holder of the Preferred.

Indeed, a holder of a Receipt could, at any time, exchange such

Receipt for the particular Preferred represented by that Receipt.

The holder could then convert or sell any shares of Preferred

that it wished, subject to compliance with applicable securities

laws.
2. Each ReceiDt Holder. as a Real Party in Interest. Must

Have the Right. UDon Default in PaYment of Dividends on One or

More Underlying Preferred. to Proceed Directlv and Individually

Aaainst the Issuer of the Preferred ReDresented bv Such ReceiDt.

Each Receipt holder would have the same right to proceed

against each Issuer of a Preferred upon default in payment of

dividends or any other obligation as any holder of that

particular Preferred.

A ReceiDt Holder Shall Not be Reauired to Act in

Concert with Other ReceiDt Holders or the Custodian.

As discussed in response to (2) above, each holder

would be entitled to proceed against the Issuer of each Preferred

in the same manner as such holder would be entitled to proceed

against the Issuer of any other standard cumulative convertible

preferred stock. Holders would be entitled to vote their shares

of Preferred of each Issuer along with other stockholders, but no

concerted action with other Receipt holders or the CUstodian

would be required.
GM2FU.R2(5P3)
01/08/93

,WILSON SONSINI, GOODRICH & ROSATI

Mr. Thomas S. Harman

The above-referenced no-action letters have also

identified the following six additional factors relevant to the

inquiry:

Each Receipt Must Evidence an Entire and Undivided

owership Interest in Each Preferred Certificate.

As discussed above, each Receipt would evidence an

entire and undivided ownership interest in at least one Preferred

certificate of each issuer, and no investor would receive a

partial interest in any certificate representing shares of

Preferred. The CUstodian would maintain a record of the

particular Preferred underlying each Receipt, and each holder of

a Receipt would be entitled to exchange it for the particular

underlying Preferred certificates represented by such Receipt at

any time.
2 . The CUstodian Must Perform OnlY Clerical Administrative

Services on Behalf of Each Preferred Holder.

The principal role of the CUstodian would be to hold

the Preferred and to maintain a record of the holders of the

Receipts and of the Preferred underlying each Receipt. In

addition, the CUstodian would act as transfer agent with respect

to transfers of the Receipts and in some cases of the underlying

Preferred. As discussed above, the CUstodian may also act as

paying agent on behalf of the Issuers. All of these tasks are

nondiscretionary and ministerial.

Nei ther the CUstodian nor the Placement Aaents may

Guarantee or Otherwise Enhance the Creditworthiness of any

Preferred or Receipt.

RS&Co and the other broker-dealers would be acting as a

private placement agent for the Issuers only and would not be

obligated in any way to holders of Preferred or Receipts with

respect to performance of the obligations set forth in the

Certificate of Designation with respect thereto. In addition, as

discussed above, the CUstodian would perform only administrative

tasks and would not in any event become obl igated on the Receipt

or on any underlying Preferred.

The CUstodian will Undertake to NotifY Receipt Holders

in the Event of a Default and to Forward to Receipt Holders

CODies of All Communications Relating to Any Dividend Payment Default on a Preferred. Such an undertaking would be included in the custodial

agreement.
GM2FU.R2(5P3)
01/08/93

WILSON, SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

Neither the Preferred nor the Receipts will be

Considered Assets of the ~Dositary or any Placement Aaent.

Nei ther the Preferred nor the Receipts would be assets of RS&Co or any other placement agent except to the extent that

they purchased the Preferred, and the placement agents would not

treat them as such. The custodial agreemnt would provide that

the CUstodian will not treat the Preferred or Receipts as its

assets.
6. No Other Factors are Present. Such as Remarketing
Aareements. that Would Reauire the Receipt Holders to Relv U~n the CUstodian or any Third Party to Obtain the Benefit of their

Investment.
No such factors are present.

Conclusion
In sumary, we are of the opinion that no new security would be created by the BioBonus. Program. Anyone Issuer involved in the BioBonus. Program could issue preferred stock with terms

substantially identical to the terms of Preferred offered

pursuant to the BioBonus. Program. The fact that a numer of

Issuers would be issuing such securities simultaneously and that

a CUstodian would be engaged to offer investors the convenience

of having a single Receipt that represents specific identified

underlying Preferred certificates, without any substantive effect

on the rights of the holders of the Preferred, would not result

in the creation of any security other than the issues of

Preferred themselves.

Confidential Treataent Requested

As noted in the original Letter, pursuant to 17 CFR §200.8l,

we request confidential treatment of the contents of this letter,

our communications with the Commission's staff with respect

thereto and the response of the Commission's staff until a date

120 days after release of your response to us.

If you determine that you are unable to render the advice

that we have requested, we would appreciate the opportunity to

discuss our request with the Staff prior to the issuance of a

wri tten response to this letter or to either of the Previous

Letters. We are available at your convenience to meet in person

or by telephone for this purpose.

GMP2FU.R2(5P3)

01/08/93

"'WILSON 50NSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

If you have any questions, please direct them to the

undersigned or to Gregory M. Priest, Esq., also of this office.

As we have indicated in our telephone conversations with the

Staff, we would hope to receive a response to our request at the

earliest possible date. We would therefore greatly appreciate

your prompt attention to this matter.

Very truly yours,

WIISON, SONSINI, GODRICH & ROSATI Professional Corpration Ma- /c4v~~~/~ lG~ Alan K. Austin ~ :b cc: Eli Nathans, Esq., Division of

Investment Management

Dr. J. Misha Petkevich, Robertson,

Stephens & Company

Gregory M. Priest, Esq., Wilson,

Sonsini, Goodrich & Rosati

GM2FU.R2(5P3)
01/08/93

WILSON, SONSINI, GOODRICH & ROSATI PROFESSIONAL CORPORATION Two PALO ALTO SQUAR PALO ALTO, CALFORNI 94306 FACSIMILE, 14151 493-6811 TELEPHONE, (415) 493-9300 JOHN ARNOT WILSON COUNSEL Investment Company

Act of 1940-
Section 3

December 18, 1992

VIA .BDBRA BXPRB88

Thomas S. Harman, Esq.

Associate Director and General Counsel

Division of Investment Management

Securities and Exchange Commission

450 5th street, N.W.

Judiciary Plaza

Washington, DC 20549

ae: Bo-action aequest concerning Bonus. Prograa confidential Treataent aequested, oriqinal Letter

Dated Novemer 13. 1992

Dear Mr. Harman:

As we have discussed in recent telephone conversations with

Eli Nathans, Esq. of your office, we are writing to provide you

information relating to certain changes to the proposed Bonus.

Program as described in our original letter to you of November

13, 1992 (the "Original Letter"). Unless otherwise defined

herein, capitalized terms herein have the meanings set forth in the Original Letter. Except as described herein, the Bonus. Program remains

substantially identical to the description provided in the

original Letter. As we have discussed with Mr. Nathans, we do

not believe that the changes in the Bonus. Program described

herein are relevant to the legal analysis contained in the

Original Letter. We therefore continue to believe that

implementation of the Bonus. Program without registration of an

investment company under the Investment Company Act is entirely

consistent with the Investment Company Act.

Accordingly, we respectfully renew our request that you

confirm that the Division of Investment Management will not

recommend that the Commission take any enforcement action under

the Investment Company Act if the Bonus. Program (in the revised

form described in this letter) is implemented without any

registration of an investment company under the Investment

Company Act.

WILSCN, SONSINI, GOODRICH & ROSATI Thomas S. Harman, Esq.

Decemer 18, 1992

Chage. to the Bonu.- Proqraa

The following are the substantive changes that have been

made in the program:

i. The instruent underlying each Receipt has be changed
from a Deture to a share of cuulative convertible preferred stock (the "Preferred"). Although the nature of the instruent

underlying the Receipt has changed, the fundatal term of the

Bonus. Program are as described in the Original Letter. Each

Receipt would represent ownerShip of identified certificates

representing shares of Preferred, and a holder of a Receipt would

have all of rights and privileges of a holder of the Preferred,

with the same rights to proceed against the issuer of the

Preferred as a holder of the Preferred. The Custodian would play

the same role with respect to the Receipts and the Preferred as

it was to have played with respect to the Receipts and the

Debentures as described in the Original Letter.

As a consequence of the shift from Debentures to Preferred,

there would no longer be an Indenture. The provisions of the

Indenture described in the Original Letter would be replaced by

the rights, preferences and privileges of the Preferred, which

would be set out in a Certificate of Designation of Rights,

Preferences and Privileges that each issuer would file with the

secretary of state of its jurisdiction of incorporation. As with

the Debenture structure, each issuer's Certificate of Designation

would be substantially identical to each other issuer's

Certificate of Designation.

The conversion features of the Preferred would be

substantially identical to those described with respect to the

Debentures in the Original Letter, except that the period during

which each issuer's Preferred would convert into the Common stock

of its issuer based on the index of several issuers' Common

stocks would be six years rather than five as had originally been

contemplated. As we have discussed orally with the staff and now

confirm in writing, after the expiration of such period each

issuer's Preferred would become convertible into its issuer's

Common stock based on the value of that issuer's Common stock

rather than based on the performance of the entire index.

GMP2FU.R1(5P3)
12/15/92

WILSON, SONSINI, GOODRICH & ROSATI Thomas S. Harman, Esq.

Decemr 18, 1992

The period during which the Prefered would be traded
together if withdrawn from cutody by the CUtoian woud be the first six years after the date of issuance, instead of five years as describ in the Original Lette. If the holders of th Preferred wished to "unundle" trading of the securities during

this six-year period, they could do so at their option in either

of two ways:

(a) Any holder of Preferred could convert its shres of Preferred into Common stock, as long as during the first six

years all shres of Preferred unerlying a sinle Receipt were

converted saul taneously . The Common stoc of the various

issuers received upon conversion of the Preferred would then be

tradeable without any restriction whatsoever, subj ect to

compliance with the federal and state securities laws. The

requirement of simultaneous conversion could be eliminated at any

time by the vote of the holders of a majority of the Preferred.

(b) Holders of a maj ori ty of the Preferred could elect to eliminate the requirement that a proportionate numr of shares of each issuer's Preferred be traded together, in which

event shares of Preferred could be traded separately at any time

thereafter without any restriction whatsoever, subj ect to

compliance with the federal and state securities laws.

Legal ADalysis

We do not believe that the changes to the Bonus. Program

described above alter the legal analysis in the Original Letter

as regards the Investment Company Act. Other than changes

necessary to accomplish the change from Debentures to Preferred,

which changes in no way affect either the terms of the Receipts

or any of the legal analysis contained in the Original Letter,

the other changes ensure that the securities are bound together

only to the extent that their holders wish them to be.

Specifically, the holders of the Preferred would be permitted to

eliminate the conversion and trading restrictions at any time

prior to six years from the date of issuance by the simple medium

of a majority vote. In addition, a holder of the Preferred who

wished to convert a proportionate numer of shares of each

issuer's Preferred into Common stock could do so and could freely

resell the resulting Common stock (subject to applicable

securities laws) without any requirement that the Common stock of

other issuers be sold concurrently.

In sumary, we continue to be of the opinion that no new

security would be created by the custodial arrangement involved

in the Bonus. Program as described in the Original Letter with

the furter refinements described herein.

GMP2FU.R1 (5P3)

12/15/92

WILSON, :30NSINI, GOODRICH & ROSATI Thomas S. Harman, Esq.

Decemr 18, 1992

Confi4etial irreata1; Reqe.1;e4

As noted in the original Let1:er, puruat to 17 CFR 1200.81,

we reqest confidential treatmt of the con1:ts of this letter,

our communications with the Commission's staff with respe thereto an the response of the COJssiOD' s staff un1:il a date 120 days after release of your response 1:0 us.

If you determine that you are unle to rener the advice that we have requested, we would appreciate the opportunity to

discuss our request with the Staff prior 1:0 the issuance of a

written response to this letter or to the original Letter. We

are available at your convenience to meet in person or by

telephone for this purpose.

If you have any questions, please direct them to the

undersigned or to Gregory M. Priest, Esq., also of this office.

As we have indicated in our telephone conversations with the

Staff, we would hope to receive a response to our request prior

to Christmas. We would therefore greatly appreciate your prompt

attention to this matter.

Very truly yours,

WILSON, SONSINI, GODRICH & ROSATI

Professional Corporation

M (L t. Av S NI! t¡ t,-
Alan K. Austin
:b cc: Eli Nathans, Esq., Division of

Investment Management

Dr. J. Misha Petkevich, Robertson,

stephens & Company

Gregory M. Priest, Esq., Wilson,

Sonsini, Goodrich & Rosati

GM2FU.R1 (5P3)

12/15/92

WILSON, SONSINI, GOODRICH & ROSATI PROFESSIONAL CORPORATION Two PAW ALTO SQUAR PALO ALTO. CALIFORNIA 94306 FACSIMILE: 14151493-6811 TELEPHONE, (4151493-9300 JOHN ARNOT WILSON COUNSEL Investment Company

Act of 1940-
Section 3

VIA FEDERAL EXPRESS

Thomas S. Harman

Associate Director and General Counsel

Division of Investment Management

Securities and Exchange Commission

450 5th Street, N. W.

Judiciary Plaza

Washington, DC 20549

Re:, No-action Request concerning Bonus. Bond Proqram Confidential Treatment Reauested

Dear Mr. Harman:

As we have discussed in our recent telephone conversations

with Mr. Lawrence Stadulis of your office, we are writing with

respect to a convertible debenture program (the "Bonus1l Program")

being proposed by our client Robertson, Stephens & Company

("RS&Co"), a registered broker-dealer under section 15 (b) of the

Securities Exchange Act of 1934, as amended (the "Exchange Act") .

Issuers participating in the Bonus1l Program would issue in

private placements to institutional investors convertible

subordinated debentures (the "Debentures"). These Debentures

would be deposited with a commercial bank as custodian (the

"custodian") that would issue depository receipts (the

"Receipts") to each investor. A more complete discussion of the

Bonus1l Program follows below.

We respectfully request that you confirm that the Division

of Investment Management will not recommend that the Securities

and Exchange Commission (the "Commission") take any enforcement

action under the Investment Company Act of 1940, as amended (the

"Investment Company Act"), if the Bonus1l Program is implemented

without any registration of an investment company under the

Investment Company Act.

The Bonus. Program

RS&Co. anticipates that approximately seven to 14 issuers

would participate in the Bonus1l Program by privately placing

varying amounts of Debentures (approximately $15 to $80 million

WILSON, SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

per issuer) and that the aggregate amount raised in the private

placements would be approximately $300 to $700 million. Each

issuer participating in the Bonus~ Program would be a company

with a publicly-traded class of securities registered under

Section 12 of the Exchange Act. Each issuer would issue

substantially identical Debentures in private placements to a

group primarily composed of institutional investors. The

Debentures would be offered together such that each purchaser in

the private placement would purchase Debentures issued by each

issuer in the Bonus. Program in proportion to the aggregate face

amount of Debentures sold by such issuer. Thus, for example, if

the face amount of Debentures issued by one participating issuer

consti tuted twelve percent of the total face amount of Debentures

issued pursuant to the Bonus~ Program, twelve percent of each

investor's purchase would consist of that issuer's Debentures.

As a convenience for holders of the Debentures, the

Debentures issued pursuant to the Bonus~ Program would be

deposited with the CustOdian, which would issue to each investor

a Receipt or Receipts. Each Receipt would represent at least one

particular identified Debenture issued by each of the

participants in the program, and in no event would a receipt

evidence a partial interest in any particular Debenture. Each Investor would be free at any time to present its Receipt (s) to the Custodian and receive in exchange the specific corresponding

Debentures, and a holder of a Receipt would in all respects have

the same rights as would a holder of the underlying Debentures

represented by the Receipt.

The role of the Custodian with respect to the Bonus~ program

would be purely ministerial, and it would not act as trustee

under any of the indentures pursuant to which the Debentures

would be issued. The primary duties of the Custodian would be to

hold the Debentures and to maintain records of the holder of each

Receipt and of the Debentures underlying such receipt. The

Custodian would also act as transfer agent to register transfers

of the Receipts and the underlying Debentures. It is possible

that, for administrative convenience, the Custodian would also be

designated as paying agent for the issuers of the Debentures. In

such role, the Custodian would act as a conduit for paYments of

principal and interest to the holders of the Debentures by

receiving cash from each issuer in trust for holders of the

Debentures on each date for the paYment of interest or principal

and would immediately disburse such cash to the holders of the

underlying Debentures as provided in the terms of the indenture

wi th respect to each Debenture. This role would be

administrative only. Upon conversion of the Debentures, the

Custodian may be used as a conduit between the issuers and the

Debenture holders for the delivery of securities issuable upon

conversion of the Debenture to the holder of such Debenture.

GMP2FU.W42(SP3)
11/11/92

WiLSON, SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

As is standard in the convertible debenture market, each

issuer would sell its Debentures pursuant to the terms of a

separate indenture defining the rights and obligations of the

issuer and the holders of that issuer's Debentures. Each

Debenture issued by a participating issuer in the Bonus. Program

would be substantially identical to each other Debenture, with

the exception that each Debenture would be solely the obligation

of, and be convertible into the Common stock of , its issuer.

Each Debenture would have a ten-year term and would be

convertible at any time at the option of the holder into the

common stock of the issuer of the Debenture. In addition, each

Debenture would automatically convert into Common stock of its

issuer if, at any time after three years from the date of

issuance of the Debentures, the weighted average per-share market

price of the common stock of the participating issuers (such

weighting to be performed based upon the face amount of

Debentures issued by each issuer) increased to at least 125% of

the level of the weighted average per-share conversion price

established at the time the Debentures were sold. For example,

if on the date the Debentures were sold the aggregate conversion

price of a basket including a proportionate number of shares of

common stock of each of the participating issuers were $1,000,

and subsequent to three years following the issuance of

Debentures the aggregate value of the basket of shares of common

stock exceeded $1,250, then at that point all of the Debentures

would automatically convert into the common stock of their respective issuers. Resales of the Debentures and the Receipts would be

accomplished primarily through Rule 144A. Each issuer would

covenant with the purchasers of its Debentures to make available

information about such issuer necessary to make Rule 144A

available to holders of the Debentures for resales of the

Debentures and the Receipts representing the Debentures to

qualified institutional buyers, subject to the limitations on

such resales discussed below.

RS&Co believes that, for the Debentures to be a reasonably

liquid investment for the purchasers in the Rule 144A trading

market, the resale of each Debenture would need to be restricted

for a period of time such that it could only be resold

simul taneously with the resale of a proportionate face amount of

Debentures issued by each participating issuer. In this manner,

each investor would be a participant in a single approximately

$300 to $700 million market, rather than multiple separate $15 to

$80 million markets. Accordingly, during the first five years of

each Debenture's term, it would not be transferable except in

connection with a transfer to the same buyer of proportionate

amounts of the Debentures issued by the other participants in the

Bonusw Program. Because each Receipt would evidence a

GMP2FU.W42(SP3)
11/11/92

WiLSON. SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

proportionate face amount of each participating issuer's

Debentures, each Receipt would be tradeable at any time without

violation of the above restrictions subj ect to compliance with

Rule 144A. If the investor held Debentures, it could sell them

under Rule 144A subject to the requirement that a proportionate

numer of each issuer's Debentures be sold to the same buyer

concurrently. After the first five years of each Debenture's

term, that Debenture could be transferred separately. The

Debentures would be convertible at any time at the option of the

holder into the underlying common stock provided that, during the

first five years, a proportionate face amount of each of the

Debentures issued pursuant to the program were converted

simultaneously.
Because the Debentures would be offered privately primarily

to institutions, RS&Co does not anticipate that the initial

number of holders would exceed 100. Indeed, it is probable that

the number would be considerably less than that. However,

trading of the Debentures under Rule 144A could conceivably

resul t in the number of holders of Debentures at a particular

point subsequent to the initial private placement aggregating

more than 100. Because RS&Co believes that investors would have

concerns about artificial limits on the ability of a holder of a

Debenture to resell such Debenture in reliance on Rule 144A, the

Bonus. Program as currently contemplated could not be operated in

reliance on the exemption from registration under the Investment

Company Act set forth in Section 3 (c) (1) thereof.

Legal Analysis
In three recent no-action letters, the Division of

Investment Management (the "Division") has applied SUbstantially

identical analyses to the question whether programs similar to

the BonusN Program required registration of an entity pursuant to

the Investment Company Act. See CRT Government Securities, Ltd.

(available August 4, 1992); Bear, Stearns & Co., Inc. (available

January 28, 1992); and Merrill Lynch, Pierce, Fenner & Smith

Incorporated (available September 6, 1990).

Each of these letters also requested the confirmation of the

Division of Corporation Finance that the instruments involved

could be issued without registration under the Securities Act of

1933, as amended (the "Securities Act"). As the Debentures

involved in the BonusN Program would be issued in private

placements exempt from registration pursuant to Section 4 (2) of

the Securities Act, we are not requesting any such confirmation.

In each of the above-referenced letters, the response of the

Commission's Staff focused primarily on the three factors that

are discussed below:

GMP2FU.W42(SP3)
11/11/92

WILSON, SONSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

Each Holder of a Receipt Must Have all of the Riqhts

and Privileqes of a Holder of the Debentures.

As discussed above, the Receipts represent a

convenience only. Each holder of a Receipt would have precisely

the same rights and privileges as a holder of the Debentures that

underlie the Receipt, and a holder of a Receipt would have no

rights in addition to those of a holder of the Debentures.

Indeed, a holder of a Receipt could, at any time, exchange such

Receipt for the particular Debentures represented by that

Receipt.
2. Each ReceiDt Holder. as a Real Party in Interest. Must

Have the Riqht. upon Default in Payment on One or More Underlvinq

Debentures. to Proceed Directlv and Individuallv Aqainst the

Issuer of the Debentures Represented bv Such Receipt.

Each holder would have the same right to proceed against

each issuer of a Debenture upon default in paYment of principal

or interest that such holder would have if it only held that

particular Debenture. The provisions regarding procedures to be

followed in the event of default would be the same as those

customarily found in convertible subordinated debentures.

A Receipt Holder Shall Not be Reauired to Act in

Concert with Other Receipt Holders or the Custodian.

As discussed in response to (2) above, each holder

would be entitled to proceed against the issuer of each Debenture

in the same manner as such holder would be entitled to proceed

against the issuer of any other standard convertible subordinated

debenture. Convertible subordinated debentures customarily

provide that certain remedies in the event of default (including

acceleration of maturity) must be approved by the holders of a

specified percentage of the outstanding Debentures. Such

provisions would be present in the Indentures with respect to

each Debenture, but they would require no greater degree of

concerted action than is customary for convertible subordinated

debentures. In addition, the Debentures would include a

provision stating that each holder of a Debenture shall have the

right, absolute and unconditional, to receive paYment of the

principal of and interest on such Debenture and to convert such

Debenture and to institute suit for the enforcement of any such

right to paYment or conversion, without acting in concert with

the Custodian, other Debenture holders or any other parties.

The above-referenced no-action letters have also

identified the following six additional factors relevant to the

inquiry:
GMP2FU.W42(5P3)
11/11/92

WILSON, SJNSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

Each ReceiDt Must Evidence an Entire and Undivided

Ownership Interest in Each Debenture.

As discussed above, each Receipt would evidence an

entire and undivided ownership interest in at least one Debenture

of each issuer, and no investor would receive a fractional

interest in any Debenture. The Custodian would maintain a record

of the particular Debentures underlying each Receipt, and each

holder of a Receipt would be entitled to exchange it for the

particular underlying Debentures represented by such Receipt at

any time.
2 . The Custodian Must Perform Only Clerical Administrative

Services on Behalf of Each Debenture Holder.

The principal role of the custodian would be to hold

the Debentures and to maintain a record of the holders of the

Receipts and of the Debentures underlying each Receipt. In addi tion, the Custodian would act as transfer agent with respect to transfers of the Receipts and the underlying Debentures. As

discussed above, the Custodian may also act as paying agent on

behalf of the issuers. All of these tasks are nondiscretionary

and ministerial.

Nei ther the Custodian nor RS&Co mav Guarantee or

Otherwise Enhance the Creditworthiness of any Debenture or

Receipt.
RS&Co would be acting as a private placement agent for

the issuers of the Debentures only and would not be obligated in

any way to holders of Debentures or other Receipts with respect

to performance of the Obligations set forth therein. In

addi tion, as discussed above, the Custodian would perform only administrative tasks and would not in any event become obligated

on the Receipt or on any underlying Debenture.

The Custodian will Undertake to NotifY Receipt Holders

in the Event of a Default and to Forward to Receipt Holders

Copies of All Communications Relatinq to Any PaYment Default on a

Debenture.
Such an undertaking would be included in the custodial

agreement.
5. Neither the Debentures nor the Receipts will be

Considered Assets of the DeDository or RS&Co.

Nei ther the Debentures nor the Receipts would be assets of RS&Co except to the extent that it purchases them, and RS&Co

GMP2FU.W42(SP3)

11/11/92

WiLSON. SJNSINI, GOODRICH & ROSATI Mr. Thomas S. Harman

would not treat them as such. The custodial agreement would

provide that the custodian will not treat the Debentures or

Receipts as its assets.

No Other Factors are Present. Such as Remarketina

Aareements. that Would Reauire the ReceiDt Holders to ReI v UDon

the Custodian or any Third Party to Obtain the Benefit of their

Investment.
No such factors are present.

Conclusion
In summary, we are of the opinion that no new security would

be created by the custodial arrangement involved in the Bonus~

Program. Anyone issuer involved in the Bonus. Program could

issue a debenture with terms sUbstantially identical to the terms

of Debentures offered pursuant to the Bonusw Program. The fact

that a numer of issuers would be issuing such securities

simul taneously and that a Custodian would be engaged to offer

investors the convenience of having a single Receipt that

represents specific identified underlying Debentures, without any

substantive effect on the rights of the holders of such

Debentures, would not result in the creation of any security

other than the Debentures themselves.

Confidential Treatment Requested

Pursuant to 17 CFR §200.81, we hereby request confidential

treatment of the content of this letter, our communications with

the Commission's Staff with respect thereto and the response of

the Commission's Staff until a date 120 days after release of

your response to us. Certain features of the Bonusw Program are

innovative and have not previously been offered in any other

program of which we are aware. Intellectual property protection

of such features would be very difficult, if not impossible, to

achieve. Accordingly, RS&Co's ability to bring the Bonusw

Program to investors before other investment banks can create

similar programs based upon RS&Co's structure (which has been

outlined in detail herein) requires RS&Co's ability to maintain

the confidentiality of that structure for as long as possible.

We therefore respectfully request confidential treatment as

described above.

If you determine that you are unable to render the advice

that we have requested, we would appreciate the opportunity to

discuss our request with the Staff prior to the issuance of a

GMP2FU.W42(SP3)

11/11/92

WiLSÓN. SJNSINI, GOODRICH & ROSATI

Mr. Thomas S. Harman

wri tten response to this letter. We are available at your

convenience to meet in person or by telephone for this purpose.

If you have any question, please direct them to the

undersigned or Gregory M. Priest, Esq. also of this office.

RS&Co has informed us that it believes that time is of the

essence to its ability to move forward with the Bonusw Program.

We would therefore greatly appreciate your prompt attention to

this matter.

Very truly yours,

WILSON, SONSINI, GOODRICH & ROSATI

Professional Corporation

Â-l ~ k. l' (IN,./ JS,~

Alan K. Austin

:b cc: Lawrence Stadulis, Esq., Division of

Investment Management

Mr. J. Misha Petkevich, Robertson,

Stephens & Company

Gregory M. Priest, Esq., Wilson,

Sonsini, Goodrich & Rosati

GMP2FU.IJ42(5P3)
11/11/92