DISTRIBUTIONS OF STOCK FROM ESOPS TO PARTICIPANTS WERE NOT OWNER SHIFTS OR EQUITY STRUCTURE SHIFTS.

UIL Number(s) 0382.00-00

                                             Date: December 6, 1994

This letter responds to your August 4, 1994, request for rulings as to certain federal income tax consequences of a consummated transaction. The information provided in that request and in later correspondence is summarized below.

Company is engaged in Business Y. Company has outstanding publicly traded voting common stock (the "common stock") and nonpublicly traded Series A convertible voting preferred stock (the "Series A Preferred Stock"), which is convertible into Company common stock. Company is a loss corporation as defined in section 382(k)(1) of the Internal Revenue Code.

On Date A, Company, a newly-formed corporation, acquired from an unrelated party substantially all the assets that then constituted Business Y. Also on Date A, ESOP 1, an employee stock ownership plan within the meaning of section 4975 and a trust qualified under section 401(a), purchased a percent of Company common stock for cash and a promissory note held by Company.

Initially, all shares of Company stock held by ESOP 1 were held in a suspense account as required for leveraged ESOPs under the Code. Subsequently, on an annual basis, shares were released for allocation to the stock accounts of the respective employee participants in proportion to the amount of the acquisition loan that was repaid for the plan year. Allocations were made on the basis of relative compensation of participants in compliance with Code limitations. As a result of an accelerated repayment of the acquisition loan, the final payment leading to the last allocation of the suspense account shares to participants' accounts has been made.

Pursuant to ESOP 1, the accounts of all participants employed by Company on Date A or who joined Company prior to Public Offering 1 have been vested so that once shares were allocated to the respective employee participant accounts, there was no forfeiture or reallocation. ESOP 1 provides participants with voting power over their allocated shares. With respect to unallocated shares in the suspense account, ESOP 1 provided that such shares were subject to a "mirror image" rule, such that unallocated shares were voted in the same proportion as the allocated shares. ESOP 1 confers plan participants with voting rights relating to their interests in the plan apart from the employer securities held in it. As a result, Company cannot amend ESOP l, except for changes required by law, without the approval of participants; and it cannot terminate ESOP 1 without participant, and union consent.

ESOP 1 is required to distribute dividends paid on Company common stock to its plan participants. In addition, under ESOP 1 since Date C, the participants have been entitled, on a quarterly basis, to obtain distributions of their allocated stock, either (i) while still in service as active employees up to a maximum of c percent of their account balances, or (ii) upon retirement or other termination of service, up to a percent of their account balances. ESOP 1 also allows participants to direct the sale of their individual shares.

ESOP 2 was established on Date B, primarily to lessen the effect of reductions in employee voting power that would result from sales of common stock, as directed by ESOP 1 participants, in a public offering occurring on Date C ("Public Offering 1"). ESOP 2 differs from ESOP 1 only in the following respects: (i) the employee securities held in trust consist exclusively of Series A Preferred Stock, which has d votes per share compared to e vote for the common stock; although convertible to common stock on a f basis, the Series A Preferred Stock is not publicly traded; (ii) participants' accounts are fully vested under ESOP 2 after g years service and there is an eligibility period prior to becoming a participant; (iii) approximately h of the borrowings incurred to purchase the Series A Preferred Stock has been repaid; and (iv) although full voting rights are passed through and "mirror image" voting applies to the suspense account shares, no in-service distributions of shares are allowed from ESOP 2. The ESOP 2 participants must retire or terminate service to obtain distributions.

ESOP 2 acquired all its shares of Series A Preferred Stock on Date C simultaneous with the consummation of Public Offering 1. Public Offering 1 was a "secondary" offering of Company common stock by ESOP 1 under the direction of its participants. When ESOP 2 acquired Company Series A Preferred Stock, Company had actual knowledge that all participants in ESOP 2 were also participants in ESOP 1.

On Date D, Company issued k shares of its common stock to raise capital ("Public Offering 2"). As part of Public Offering 2, the Company Defined Benefit Pension Plan (the "Pension Plan") sold l shares of Company common stock at a similar price in a secondary offering. During the three-year testing period ending on Date D (the "Testing Period"), Investment Fund 1 and Investment Fund 2 each held more than 5 percent of Company stock. In addition, the Pension Plan acquired more than 5 percent of Company stock within the Testing Period.

Company has made the following representation concerning the proposed transaction:

The only partnership, estate, corporation, individual, or other person that owned 5 percent or more of Company stock during the Testing Period were Investment Fund 1, Investment Fund 2, and the Pension Plan.

Based on the information submitted and representation made, we rule as follows:

(1) The ESOP 1 and ESOP 2 plan participants are treated as owners of Company stock for purposes of section 382, and, as such, past distributions of Company stock from ESOP 1 and ESOP 2 to their plan participants do not constitute owner shifts or equity structure shifts for purposes of determining whether an ownership change has taken place under section 382.

(2) Immediately prior to Public Offering 2, the following persons were members of a single public group: (a) ESOP 1 participants; (b) ESOP 2 participants; (c) ESOP 1 and ESOP 2 participants, as distributees of stock from the ESOPs; (d) any person that purchased common stock from the ESOP 1 participants in Public Offering 1, provided that person was not a first tier entity or an individual who was a 5-percent shareholder on the Date D testing date; and (e) any subsequent purchaser from (a) through (d) above, provided that person was not a first tier entity or an individual who was a 5-percent shareholder on the Date D testing date.

No opinion is expressed about the tax treatment of the transaction 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 transaction that are not specifically covered by the above rulings. In particular, no opinion is expressed as to whether employees who became participants in ESOP 2 after Date C are treated as members of one or more separate public groups.

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

A copy of this ruling letter should be attached to Company's federal income tax returns for the taxable years which are covered by this letter.

In accordance with the power of attorney on file in this office, a copy of this letter is being sent to your authorized representative.

                                   Sincerely yours,