EQUITY INTERESTS ISSUED IN JOINT BANKRUPTCY REORGANIZATION PLAN WILL NOT CAUSE OWNERSHIP CHANGE.

UIL Number(s) 0382.00-00

                                             Date May 28, 1993

This is in reply to a letter dated December 4, 1992, from your authorized representatives requesting supplemental rulings as to the federal income tax consequences of a proposed transaction. Additional information was submitted in letters dated February 5, March 11, April 29, and May 18, 1993. The information submitted is summarized below. This letter supplements PLR 8933001 and PLR 9105042 (the "Ruling Letters").

Parent is a State X Corporation that is engaged in business as a holding company. On Date A, a date before August 14, 1986, Parent and substantially all of its active subsidiaries (collectively, the "Debtors") filed separate petitions for reorganization under Chapter 11 of the Bankruptcy Code.

Implementation of the Debtors' Joint Plan of Reorganization ("Plan") has been delayed primarily as a result of litigation and negotiations concerning pension matters. Thereafter, Parent and Agency #1 reached a tentative settlement regarding funding for the Pension Plans. Opposition by Sub 1 creditors and ensuing litigation threatened to derail the settlement, however, necessitating direct negotiations between Agency #1 and Sub 1 Committee regarding pension funding and other Plan issues.

The negotiations between Agency #1 and Sub 1 Committee led to an agreement in principle pursuant to which Agency #1 agreed, in consideration of various concessions by Sub 1 Committee, to provide for the issuance of P Rights to be distributed to Sub 1 creditors on the Effective Date. The issuer of the Rights will be a trust or corporation established by Agency #1 for this purpose prior to the effective date of the Plan (the "Effective Date") or Agency #1 itself (in either case, the "Rights Issuer"). Each Right will be a separately tradeable security with a maturity date six months after the Effective Date that entitles the holder to a payment equal to the lesser of (A) the amount by which the average per share market price of Parent common stock for the twenty trading days immediately preceding the fifth day prior to such maturity date is less than 90 percent of the per share value of such stock on the Effective Date, as determined pursuant to a specified valuation procedure, and (B) $1.50. The Rights will be distributed among certain classes of impaired Sub 1 creditors as provided by the Plan.

Pursuant to the pension settlement as negotiated among Agency #1, the Debtors, and various creditor constituencies (the "Pension Settlement"), the Debtors will have an obligation to contribute or cause to be contributed to the Pension Plans on the Effective Date approximately $Q in cash (subject to various adjustments) and Parent common stock with an estimated value of $R, together with certain other property. After the Effective Date, the Pension Plans will receive substantial fixed annual payments and certain contingent litigation and sales proceeds, as well as a percentage of the Parent group's cash flow, over a period ending on Date B or such earlier date as certain funding criteria are satisfied.

The Pension Settlement obligates Agency #1 to pay $S to Parent on the Effective Date for immediate contribution to the Pension Plans, in exchange for the right on Agency #1's part to receive, on the first anniversary of the Effective Date, shares of Parent common stock having a fair market value on such first anniversary of $1.085S (the "Agency Stock Purchase Contract").

Pursuant to the Pension Settlement, Agency will receive various consideration on the Effective Date, including zero coupon notes of Parent and Sub 1 and stock appreciation rights ("SARs") issued by Parent. The SARs entitle the holder to receive, on the first anniversary of the Effective Date, shares of Parent common stock having a then current market value equal to the appreciation in market value of a specified number of shares of Parent common stock over a strike price intended to represent the expected fully distributed value of Parent common stock as of the Effective Date. The fair market value of the SARs on the Effective Date is intended to approximate the fair market value of the Rights on the Effective Date.

To provide funds needed for implementation of the Pension Settlement, Parent has reached an agreement in principle with X regarding the purchase on the Effective Date by an indirect U.S. subsidiary of X ("Purchaser") of $T of Parent Series A Convertible Preferred Stock (the "Series A Preferred"), $U of Parent Series B Convertible Preferred Stock (the "Series B Preferred"), and $V of convertible Parent Series A Senior Secured Notes (the "Convertible Notes"). The resulting proceeds will be contributed to the Pension Plans on the Effective Date. This transaction is a condition to the effectiveness of both the Pension Settlement and the Plan.

The Series A Preferred will have a fixed liquidation preference equal to its issue price ($T in the aggregate) plus accrued and unpaid dividends and an annual preferred dividend rate of 8.5 percent, payable only in and by delivery of shares of Parent common stock with a market value equal to the dividend that is due on the first anniversary of the Effective Date. On such date, the Series A Preferred will be mandatorily converted into shares of Parent common stock with a market value equal to the issue price of the Series A Preferred. Prior to its conversion, the Series A Preferred will vote together with the Parent common stock pursuant to an agreed formula.

In addition to its fixed dividend preference, each share of Series A Preferred will be entitled to receive additional dividends if dividends on Parent common stock in the year following the Effective Date exceed a specified formula. Similarly, in addition to its liquidation preference, each share of Series A Preferred will be entitled to receive an additional liquidating distribution to the extent that the liquidating distribution on Parent common stock exceeds a specified formula.

The Series B Preferred will have a liquidation preference equal to its issue price ($U in the aggregate) plus accrued and unpaid dividends and a dividend rate of 4.5 percent, payable at Parent's election in cash or Parent common stock with a market value on the dividend payment date equal to the dividend that is due. The conversion price will be 115 percent of the market value of the Parent common stock on the 180th day after the Effective Date. The Series B Preferred will vote together with Parent common stock as a class pursuant to an agreed formula. Parent will have a right (but not an obligation) to redeem the Series B Preferred beginning on the third anniversary of the issue date at 104.5 percent of the liquidation preference plus accrued and unpaid dividends. The redemption premium declines to zero over a four-year period.

The Convertible Notes are 10-year secured notes bearing interest at a rate of 8.5 percent if paid in cash and 10.5 percent if paid in kind. The conversion price will equal 115 percent of the market price of Parent common stock 270 days after the Effective Date. Parent has the right to redeem the Convertible Notes beginning on the third anniversary of the Effective Date, at an initial redemption premium of 8.5 percent, declining to zero over four years.

On the first anniversary of the Effective Date, Parent will generally be required to exchange non-convertible Series B Notes for the Convertible Notes to the extent that conversion at such time of the Convertible Notes, together with conversion of the Series A Preferred and the Series B Preferred, would result in an issuance of Parent common stock representing more than 12 percent of the common stock following such conversions (determined on a fully diluted basis).

The Series B Notes are secured notes with the same maturity date as the Series A Notes and an interest rate of 11 percent. For any interest payment date on or prior to the third anniversary of the Effective Date, Parent has the right to pay interest on the Series B Notes in Parent common stock, determined by reference to the market value of Parent common stock on the interest due date or, under certain circumstances, the amount for which such shares of Parent common stock are sold to a third party. The holder may demand registration of the series B Notes, in which case the interest rate will be reset at a rate designed to cause the Series B Notes to trade at par. Parent has an option to redeem the Series B Notes beginning on the third anniversary of the Effective Date, at an initial redemption premium of 5.5 percent, declining to zero over five years. Parent has an obligation to redeem ten percent of the originally issued principal amount of Series B Notes annually beginning on the fifth anniversary of the Effective Date, and to redeem the balance outstanding on the tenth anniversary of the Effective Date.

In addition to the redemption rights noted above, if, between the first and third anniversaries of the Effective Date, the trading price of Parent common stock for sixty consecutive trading days exceeds 140 percent of the conversion price established with respect to the Convertible Notes, Parent has the option to redeem all (but not part) of the Convertible Notes and Series B Notes for specified amounts following the giving of 30 days' notice.

Under the Agency #2 Settlement, Agency #2 will receive, among other things, a total of $W of Parent common stock (or, at Parent's option, cash) delivered in six equal annual installments. The stock installments will be delivered to an escrow holder designated by Agency #2 and will be sold with the proceeds (after deduction of expenses of the sale) to be delivered to Agency #2.

The Plan provides that the previously outstanding Parent common stock will be cancel led on the Effective Date and the holders thereof will receive only warrants, issued by Parent, entitling the holder to purchase new Parent common stock (the "Warrants"). Warrants will also be distributed, together with shares of the new Parent common stock, to certain impaired classes of Parent creditors. The exercise price of the Warrants will be set six months after the Effective Date at 110 percent of the average trading price of Parent common stock for the preceding 30 trading days. The expiration date of the Warrants is the fifth anniversary of the Effective Date.

Because of the need to use available cash for funding the Pension Plans on the Effective Date and thereafter, most unsecured creditors will receive their recoveries principally and in some cases entirely in Parent common stock.

If a holder would receive at least 1 but less than 100 shares of Parent common stock under the Plan, then, unless such holder elects to receive such shares and any other non-cash consideration to which such holder is entitled under or in connection with the Plan, Parent will cause an agent to be appointed on behalf of such holder and all other holders similarly situated to sell such shares and other non- cash consideration and to distribute the cash proceeds (after deduction of all expenses of such sale) to such holder.

The treatment of disputed claims is generally as described in Ruling Letter 2. There will be no physical segregation of assets allocable to disputed claims, however. Thus, while the computations associated with the Distribution Reserve Funds as set forth in the second Ruling Letter continue to apply (including use of the Weighted Method), there will be no issuance and escrow of Parent common stock and Warrants and no segregation of cash allocable to disputed claims. Rather, Parent will defer the issuance and delivery of the appropriate portion of its common stock and Warrants until such time as the disputed claims are resolved. Similarly, the Rights issuer will delay the delivery of the appropriate portion of the P Rights deliverable to Sub 1 creditors until disputed claims in the relevant classes of claims against Sub 1 are resolved.

All of the defined benefit pension plans of which Parent is administrator, including the Pension Plans, are participants in a defined benefit "master trust" arrangement. The original trust document, adopted in 1977 and amended and restated September 1, 1981 (the "Trust Instrument"), pertained to the Parent Retirement Plan. The Trust Instrument authorizes any Parent affiliate to adopt the Trust Instrument as the trust document covering that affiliate's pension plan. This has been done in every case, including in the case of each of the Pension Plans. Each of the plans covered by the master trust arrangement has the same trustee.

Each plan that has adopted the Trust Instrument may, pursuant to its terms, make a separate election to commingle any or all of its assets with those of other electing plans for investment purposes only. While the Pension Plans may exercise this option to commingle funds with respect to other property held by them, it is intended that they will not exercise such option with respect to the Parent common stock received by them on the Effective Date in accordance with the terms of the Pension Settlement as described above.

Discretion regarding the disposition of the Parent common stock held by each of the Pension Plans is expected to be vested in such plan's trustee, which is also the common trustee for all of the plans participating in the Master Trust arrangement, or alternatively in a separate common investment manager. The common trustee (or investment manager, if applicable) has a separate fiduciary obligation with respect to each plan for which it is trustee (or investment manager), and must exercise its fiduciary responsibility separately with respect to the investment decision to be made regarding disposition of Parent common stock held by each of the Pension Plans. Therefore, sales of Parent common stock held by the Pension Plans may, but need not be made on a parallel basis (e.g., the trustee or investment manager may determine to sell some or all of the stock held by each of the Pension Plans and may effect such sales at the same time).

Pursuant to the provisions of the 1986 collective bargaining agreement with Union (the "1986 Contract"), Sub 1 established an employee stock ownership plan (the "ESOP") within the meaning of section 4975(e)(7) of the Code. The ESOP qualifies under section 401(a) of the Code.

Under the 1986 Contract, Sub 1 contributed its preferred stock to the ESOP for the account of covered employees based on a formula reflecting wage and benefit concessions pursuant to the 1986 Contract. Each Sub 1 preferred share had a stated value of $16 and accrued dividends at the annual rate of 5 percent (payable in cash or Parent common stock at Sub 1's election). The 1986 contract permitted account-holders to exchange shares of Sub 1 preferred stock for shares of Parent common stock.

The Plan provides that the Sub 1 preferred stock held in the ESOP accounts will be converted into a specified amount of new Parent common stock. The Plan further provides, in accordance with the 1992 collective bargaining agreement between Sub 1 and Union (the "1992 Contract"), that as soon as practicable after the end of the year in which the Effective Date occurs Sub 1 will contribute to the ESOP additional shares of Parent common stock determined pursuant to a formula. In order to prevent dilution of the stake in Parent to which the ESOP beneficiaries are entitled under the 1992 contract, the Plan further provides for additional contributions of Parent common stock to the ESOP after such first contribution based on the number of shares of Parent common stock that are issued pursuant to various instruments issued on the Effective Date (e.g., the SARs and Warrants).

The 1992 Contract further provides that Parent shares held by the ESOP shall be fully vested and treated as though they were owned by the relevant account beneficiary even though they remain in the trust. The account beneficiary will be entitled to pass-through voting and dividend rights, the right to receive a distribution of the Parent shares in such beneficiary's account upon request (subject to any excise taxes that may apply), and the right to direct a disposition of such shares and a reinvestment of the proceeds. Account holders who do not direct a disposition of their shares until the termination of their employment are entitled to certain "shortfall" payments if the sales proceeds are below a notional account balance.

Based upon the information submitted, we hold as follows:

1. The developments set forth in this supplemental ruling request will have no adverse effect upon application of the rulings in Ruling Letter 1 and Ruling Letter 2, except as set forth below:

a. We hereby revoke rulings (12), (13), (14), (15), (16), (17), and (18) of Ruling Letter 1 (relating to the qualification of a transaction as a reorganization under section 368(a)(1)(B) of the Internal Revenue Code and the attendant federal income tax consequences) insofar as they apply to the constructive reorganization of Sub 3 because Sub 3 has failed to demonstrate that it satisfies the continuity of business enterprise requirement as set forth in section 1.368-1(d) of the Income Tax Regulations.

b. We hereby reaffirm rulings (1)(v) and (4) of Ruling Letter 1 (relating to the application of the stock-for-debt exception) with respect to Sub 1, Sub 2, Sub 3, and Sub 4 notwithstanding any failure of the condition in footnote 12 of Ruling Letter 1 (relating to the satisfaction of the requirements of section 368(a)(1)(B) of the Code). Note however that each Subsidiary, noted above, must still satisfy the requirements of sections 108(e)(8) if the stock-for-debt exception is to apply.

2. The Rights will be treated for all federal income tax purposes as issued directly to Sub 1 creditors by the Rights Issuer.

3. A Sub 1 creditor's receipt of Rights will result in gross income under section 61 of the Code measured by the fair market value of the Rights received. Cf. Rev. Rul. 73-233, 1973-1 C.B. 179.

4. For purposes of testing whether Parent has an ownership change subject to section 382 of the Code as amended by section 621 of the Tax Reform Act of 1986, Pub. L. No. 99-514, and all subsequent amendments ("new section 382") on the Effective Date, Parent shall not take into account any shift in the ownership of Parent arising out of the bankruptcy proceedings (including the issuance of Series A Preferred and Series B Preferred, the contribution of Parent common stock to the Pension Plans and the ESOP, the issuance of the Warrants, the Convertible Notes, and the SARs, the Agency 1 Stock Purchase Contract, the Agency #2 settlement, and the issuance of Parent common stock to various classes of creditors). No ownership change under new section 382 will occur as a result of the issuance of the above described interests. Section 621(f)(5) of the Tax Reform Act of 1986; section 1.382-2T(m)(5) of the temporary regulations.

5. For purposes of determining whether any of the Debtors is subject to limitation under section 382 of the Code as in effect before the amendments made by section 621 of the Tax Reform Act of 1986 and the amendments made by section 806 of the Tax Reform Act of 1976, Pub. L. No. 94-455, Parent and each of the debtors shall treat Parent common stock received after the Effective Date in transactions covered by Ruling 6 as issued on the Effective Date. Section 1.382- 1A(a)(2) of the regulations; see section 621(f)(1)(B) of the Tax Reform Act of 1986, amended by section 1006(e)(11) of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, and section 1.382-2T(m)(7) of the temporary regulations.

6. For purposes of new section 382, Parent shall not take into account the following:

a. The exercise of an option or similar interest that Parent issued on the Effective Date (including the SARs, the Agency #1 Stock Purchase Contract, the Convertible Notes, Agency #2's right to receive Parent common stock pursuant to the Agency #2 Settlement, the ESOP's right to receive contributions of Parent common stock after the Effective Date, the Warrants, and the rights of creditors (including holders of allowed and disputed claims on the Effective Date) to receive additional distributions of Parent common stock and Warrants after the Effective Date);

b. The lapse or forfeiture of the option or similar interest (including any exchange of Convertible Notes for Series B Notes);

c. The setting of the strike price of the option or similar interest (including the setting of the strike price for the Warrants and the setting of the conversion price for the Convertible Notes);

d. The conversion of any shares of series A Preferred or Series B Preferred that Parent issued on the Effective Date; or

e. The setting of the conversion price of the Series B Preferred

provided that the shareholder who exercised the option or similar interest or converted the Preferred Stock is the same shareholder who owned the option or similar interest or Preferred Stock on the Effective Date. In determining whether the shareholder who exercised the option or similar interest is the same shareholder who owned the option or similar interest on the Effective Date, Parent shall not taken into account transfers of options or similar interests between persons who are not 5-percent shareholders, transfers of options or similar interests between members of separate public groups, and transfers of options or similar interests by reason of death, gift, divorce, or separation. In determining whether the shareholder who converted the Preferred Stock is the same shareholder who owned the Preferred Stock on the Effective Date, Parent shall not taken into account transfers of Preferred Stock to the extent that the Preferred Stock is treated for purposes of new section 382 as owned at the time of its conversion by the same 5-percent shareholder(s) (including any public group) to which ownership of the Preferred Stock was attributed on the Effective Date. No owner shift or equity structure shift under section 382(g)(2) or (3) of the Code and section 1.382- 2T(e) of the temporary regulations and no testing date under section 1.382-2T(a)(2) will occur as a result of the events described in this Ruling 6. Section 621(f)(5) of the Tax Reform Act of 1986; section 1.382-2T(m)(5) of the temporary regulations.

7. For purposes of new section 382 on any testing date after the Effective Date, Parent shall treat all shareholders who received stock on the Effective Date as having held the shares of stock for every day of the testing period. Further, for purposes of new section 382 on any testing date after the exercise of an option or similar interest that Parent issued on the Effective Date or the conversion of Preferred Stock that Parent issued on the Effective Date, Parent shall treat the shareholders who received stock pursuant to the exercise of the option or similar interest or the conversion of the Preferred Stock as having held the shares of stock for every day of the testing period, provided that the shareholder who exercised the option or similar interest or converted the Preferred Stock is the same shareholder who owned the option or similar interest or the Preferred Stock on the Effective Date. For purposes of this Ruling 7, the determination whether the shareholder who exercised the option or similar interest or converted the Preferred Stock is the same shareholder who owned the option or similar interest or the Preferred Stock on the Effective Date shall be made on the same basis as for purposes of Ruling 6. Section 621(f)(5) of the Tax Reform Act of 1986; section 1.382-2T(m)(5) of the temporary regulations.

8. For purposes of new section 382 on any testing date after the Effective Date, the testing period under section 382(i) of the Code and section 1.382-2T(d) of the temporary regulations is the three year period ending on the testing date. See Ruling 4 above and section 1.382-2T(m)(5) of the temporary regulations. For any testing period beginning less than three years after the Effective Date, the effect of this ruling is the same as if the testing period began on the first day following the Effective Date because all interests in Parent immediately after the Effective Date arise out of the bankruptcy proceeding and are not taken into account for purposes of determining whether an ownership change occurs on any testing date after the Effective Date. See Ruling 7 above.

9. For purposes of new section 382, the Series A Preferred and the Series B Preferred will both be treated as stock. See Notice 88- 67. 1988-1 C.B. 555.

10. For purposes of new section 382, Parent shall treat shares of Parent common stock owned by a Pension Plan that owns less than 5 percent of the outstanding Parent stock as owned by the public group identified as a 5-percent shareholder under section 1.382- 2T(j)(1)(iv)(C) of the temporary regulations, provided that after the Effective Date the Pension Plan has not entered into formal or informal understandings with one or more parties regarding a coordinated acquisition of Parent stock by the Pension Plan and the other party or parties. Section 1.382-2T(g)(1)(iii) of the temporary regulations; see section 1.382-2T(h)(2)(iii)(B) of the temporary regulations and section 1.382-3(a)(1) of the regulations.

No opinion is expressed about the tax treatment of the transactions under other provisions of the Code and regulations or about the tax treatment of any conditions existing at the time of, or effects resulting from, the transactions that are not specifically covered by the above rulings.

This ruling is directed only to the taxpayer who requested it. Section 6110(j)(3) of the Code provides that it may not be used or cited as precedent.

A copy of this letter should be attached to the federal income tax returns of the taxpayers involved for the taxable year in which the transaction covered by this letter is consummated.

                                   Sincerely,