PERSON WITH RIGHT TO DIVIDENDS AND PROCEEDS OF SALE IS OWNER OF CORPORATE STOCK.

UIL Number(s) 0382.11-00, 0382.11-09

                                             Date: May 19, 1995

This is in reply to a letter dated October 31, 1994, requesting ruling under section 382 of the Internal Revenue Code. Additional information was submitted in a letter dated May 10, 1995. The information submitted for consideration is summarized below.

Company is a publicly owned corporation that is engaged through its subsidiaries primarily in Business X. Company's principal operating subsidiary is Subsidiary.

In Date 1, Subsidiary completed a Settlement in which it agreed, among other things, to (i) issue the Class X Common Stock and the Preferred #1 to the Supplemental Trust, (ii) issue the Preferred #2 to Organization x, and (iii) use its best efforts to raise funds to contribute to the Base Trust. In Date 2, Company issued a shares of Common Stock in a public offering and contributed the bulk of the proceeds to the Base Trust.

Company has the following six classes (and amounts) of Company stock outstanding:

1. Common (b shares). Entitled to one vote. Traded on Stock Exchange.

2. Class X Common (c shares). All shares were issued to the Supplemental Trust on Date 3. Generally not entitled to vote except for "supermajority" transactions and changes to the certificate of incorporation that affect this class. Circumstances are limited in which the Supplemental Trust can transfer the stock. If stock is transferred, it will automatically convert into Common stock.

3. Preferred #1 (d shares). All shares were issued to the Supplemental Trust on Date 4. In certain circumstances permits the Supplemental Trust to elect e members of the Board of Directors. No other voting rights or right to receive dividends or distribution. Not transferable by the Supplemental Trust. Stock is redeemable for nominal consideration upon the occurrence of certain events.

4. Preferred #2 (f shares). All shares were issued to Organization X on Date 5. Entitles Organization X to elect g members of Company's Board of Directors until Event A. Stock is not transferable and has no other voting rights or the right to receive dividends or distributions. Stock is redeemable for nominal consideration upon the occurrence of certain events.

5. Preferred #3 (h shares). Each share is convertible into i shares of Common Stock at the holder's option. Traded on Stock Exchange.

6. Preferred #4 (j shares). Each share is convertible into k shares of Common Stock at the holder's option. No voting rights except for election of two Company directors if dividends are in arrears for six quarters. Traded on Stock Exchange.

Subsidiary is a loss corporation with NOL carryforwards of approximately $1 as of Date 6. Subsidiary expects to become profitable and use its NOL carry forwards to offset its income in future years. Thus, Company wants to preserve its ability to use the NOLs without limitation. Accordingly, Company imposed transfer restrictions on its stock and took other precautions to prevent Subsidiary from undergoing an ownership change that would limit the use of the NOLs.

Company employs a stock surveillance company to help Company identify persons who control large blocks of Company stock. The surveillance company uses a variety of techniques to identify persons who hold large blocks of Company stock, including (i) tracing large trades of Company stock to the stock deposit corporation custodial accounts for which the surveillance company knows from past experience the identity of the persons who control the accounts; (ii) direct contact with large institutional investors; and (iii) review of Schedule 13F portfolio lists filed with the SEC by institutional investors. The information obtained by the stock surveillance company does not identify all of the owners of Company stock, and because the surveillance company makes certain assumptions regarding the identity of the persons who control the custodial accounts, the information is not 100% reliable. Also, if persons desire to acquire Company stock without being detected by the surveillance company, they can do so.

The stock surveillance companies assist the corporation in soliciting proxies from shareholders. Thus, the surveillance companies attempt to identify the persons who have voting authority, regardless whether such persons are the true or economic owners of the stock. In Company's case, most of the large holders of Company stock identified by the surveillance company are investment advisers that control the stock for the investment advisers' clients, which generally are mutual funds and pension plans. The investment advisers often have the right to vote the stock for their clients, who are the true or economic owners of the stock.

The Common Stock is subject to the SEC reporting requirements of Schedules 13D and 13G. Although Company's Preferred #3 and Preferred #4 are registered with the SEC and are publicly traded, these classes are not subject to reporting on Schedules 13D and 13G because they are not voting stock. However, because both classes are convertible into Common Stock -- which is subject to reporting on Schedules 13D and 13G -- in some cases Schedules 13D or 13G will identify the owners of some Preferred #3 or Preferred #4 (see SEC Rule 13(d)- 3(d)). Thus, Company may learn of the identity of some of the owners of the Preferred #3 and Preferred #4 through various means, including Schedules 13D or 13G.

It is common practice for investors, particularly large institutional investors, to acquire Company stock through their investment advisers ("IA's"). IA's are professional managers, usually registered under the Investment Advisers Act of 1940, who manage an investor's asset portfolio. Previously, IA's and other persons have filed Schedules 13D or 13G with respect to Company stock, and Company expects that these and other persons will file additional schedules with respect to Company stock in the future.

In many cases an IA's clients are one or more Regulated Investment Companies ("RIC's") that acquire substantial amounts of Company stock. If a group of RIC's use the same IA, the IA's and/or the RIC's often have common directors or employees. However, the common directors or employees do not affect the IA's fiduciary duty to act in the best interests of each of its clients.

Company has made the following representations in connection with this ruling letter:

(a) Company will continue to retain the same or a similar stock surveillance service as that described in the ruling request, or will utilize such other surveillance service or methods as may become available that is reasonably expected to provide at least the same level of stock ownership information as would be available if, instead, Company retained the service currently used.

(b) In determining the aggregate ownership of Company stock by any Economic Owner, Company will take into account Economic Ownership of Company stock of one percent or more by such owner that is actually known to any director or officer of Company (except that Company shall not take into account any Economic Ownership known to an officer or director of Company in which such officer or director is under either a legal or fiduciary duty not to disclose to Company unless Company otherwise has independent knowledge of such ownership).

Based solely on the information submitted, it is held as follows:

1. A person who has the right to the dividends and proceeds from the sale of Company stock ("Economic Ownership") is the owner of the stock for purposes of section 382 ("Economic Owner"). Thus, an IA that has the power to vote and/or dispose of Company stock ("Reporting Ownership") but does not have Economic Ownership of the stock is not the Economic Owner of the stock.

2. Unless Company has actual knowledge to the contrary, Company can rely on the existence or absence of Schedules 13D and 13G to identify all persons who directly own 5 percent or more of the Common Stock. See Temp. Reg. section 1.382-2T(k)(1)(i).

3. If a Schedule 13D or 13G reports ownership of more than 5 percent of the Common Stock, but does not report ownership of 5 percent or more of all of Company's stock (within the meaning of section 1.382-2T(f)(18)), Company can rely on the schedule (and the absence of other Schedules 13D and 13G) to determine that the owners of the stock do not own 5 percent or more of Company stock and thus are members of Company's direct public group (unless Company has actual knowledge that an owner of the stock owns 5 percent or more of Company stock). See section 1.382-2T(k)(1)(i).

4. If the information reported on a Schedule 13D or 13G does not establish that a person owns 5 percent or more of Company stock (within the meaning of section 1.382-2T(f)(18)), Company can rely on the schedule (and the absence of other Schedules 13D and 13G) to determine that no owner of such stock owns 5 percent or more of Company stock (unless Company has actual knowledge that an owner of the stock owns 5 percent or more of Company stock). See section 1.382- 2T(k)(1)(i).

5. If an IA files a Schedule 13D or 13G that reports Reporting Ownership on behalf of two or more Economic Owners of more than 5 percent of Common Stock and the Economic Owners do not file a Schedule 13D or 13G that affirms the existence of a "group" (within the meaning of section 13(d)(3) of the Securities Exchange Act of 1934), Company can rely on the absence of a Schedule 13D or 13G by the Economic Owners to determine that the Economic Owners are not members of a group that constitutes an "entity" (within the meaning of section 1.382-3(a)(1)(i)) unless Company has actual knowledge that the Economic Owners constitute an "entity". See section 1.382-3(a)(1)(i) section 1.382-2T(k)(1)(i)

6. Two or more Economic Owners of Company stock will not constitute an "entity" (within the meaning of section 1.382- 3(a)(1)(i)) merely because: (a) one or more directors or employees of the IA are also directors and/or employees of the Economic Owners, or (b) the IA has authority to undertake any of the following activities with respect to Company stock owned by the Economic Owners:

i) voting the stock,

ii) acquiring or disposing of shares of the stock (including batch trading of shares of the stock or cross trading involving the stock),

iii) using a common custodian to hold the stock,

iv) filing Schedules 13D or 13G with respect to stock (unless a Schedule 13D or 13G filed with the SEC states that the Economic Owners are acting in concert or otherwise are engaged in a coordinated acquisition of shares of Company stock),

v) communicating with Company management regarding Company's operations, management or capital structure,

vi) adhering to an IA's general policies for voting securities, such as voting in favor of cumulative voting, financially reasonable golden parachutes, one-share-one- vote, management cash incentives, and pre-emptive rights and voting against greenmail, poison pills, supermajority voting, blank check preferred stock which leaves certain terms open to the Board of Director's approval without requiring shareholder vote, and super-dilutive stock options which cause a higher than usual dilutive effect on a company's stock.

vii) communications by an IA with clients or prospective clients (A) relating to the employment of the IA, (B) explaining the IA's investment philosophy, (C) reporting on the IA's investment performance, (D) analyzing the relative investment potential of securities, or (E) similar transactions.

7. Company will not be deemed to know that Economic Owners constitute an "entity" (within the meaning of section 1.382- 3(a)(1)(i)) merely by reason of knowing that the IA and one or more of the Economic Owners have overlapping directors or employees or that an IA has undertaken or has the authority to undertake one or more of the activities described in paragraph 6 above with respect to Company stock owned by the Economic Owners.

These rulings are limited to the facts and circumstances of this case and the authorized classes of stock described in this letter. Except as ruled above, no opinion is expressed as to the federal tax consequences of the transaction described above under any provision of the Code.

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

Pursuant to the powers of attorney on fife in this office, a copy of this letter has been sent to the taxpayer.

                                   Sincerely yours,