Company Name: Hadron, Inc.
Public Availability Date: July 31, 1981
INQUIRY LETTER 1
SHEA & GOULD
330 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 621-3200
June 05, 1981
Division of Corporation Finance
Securities and Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Re: Hadron, Inc.
Gentlemen:
As counsel to Hadron, Inc. (the "Company"), we have been asked to render our
opinion as to the resale by certain holders of unregistered common stock of the
Company pursuant to Rule 144.
These shareholders are former
distributors of the Companys products and received their shares in March 1979
in settlement of various obligations which the Company owed to them. The
issuance to them of these shares was, in the Companys judgment, effected
pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933
(the "Act"). Subsequently, in March 1980, the staff of the Commission advised
the Company that, in its judgment, the issuance of such shares may have been in
violation of Section 5 of the Act. As a result, the Company, without necessarily
agreeing with the staffs position, pursuant to Rule 254 under the Act, reduced
the number of shares which it had proposed to issue in a stock distribution
pursuant to Regulation A in an amount equal to the number of shares which it had
issued to such distributors. To the Companys knowledge, at no time during the
period from March 1979 to March 1980 was there any awareness on the part of the
distributors that the issuance to them of their shares may have been in
violation of Section 5 of the Act. Moreover, the general increase during that
period in the market price of the Companys common stock would have made it
unlikely that, had they known of the violation or alleged violation, that they
would have exercised any of their rights under the Act in connection therewith.
Section (d)(3)(A) of Rule 144
states that, in computing the two-year holding period under the Rule, there is
to be "excluded any period during which the person for whose account the
shares are sold had a short position in, or any put or other option to
dispose of, any equity securities of the same class...." Section 12 of the Act
grants the purchaser of a security sold in violation of Section 5 of the Act,
among other rights, the right to "put" the security back to the issuer thereof.
Section 13 of the Act requires that any such action be brought within one year
after the occurrence of the violation upon which the action is based.
Assuming, without conceding,
that the issuance in March 1979 to the former Hadron distributors of shares of
the Companys common stock was, in fact, a violation of Section 5, then such
shareholders were entitled to put the stock back to the Company for a period
ending in March 1980. The question that arises is whether this right caused a
tolling of the holding period under Rule 144 with the result that such holding
period, in fact, commenced in March 1980 with the expiration of the right under
Section 13 of the Act.
In our view, Section (d)(3) of
Rule 144 was never intended to cover a situation such as this one where the put
arises from the operation of the Act and results from a violation or alleged
violation of the Act by the issuer itself. It seems particularly unfair to
penalize the holders of the stock in a situation where they did not realize that
they had the right to put the stock to the Company during that period and, in
view of the situation of the significant increase in the market price of the
stock during the period, would certainly not have exercised the put in any
event.
We request that you concur in
our judgment that the holding period of such period commenced in March 1979 and,
assuming compliance in all other respects with Section (d) of Rule 144, expired
in March 1981 for purposes of sales under Rule 144.
Very truly yours,
Samuel Bergman
INQUIRY LETTER 2
SHEA & GOULD
330 MADISON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE(212) 621-3200
June 25, 1981
Via Federal Express
Peter Romeo, Esq.
Division of Corporation Finance
Securities and Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Re: Hadron, Inc.
Dear Mr. Romeo:
We were advised today by your staff that your division has no record of my
letter dated June 5, 1981 requesting the staffs no-action position on a matter
concerning the Securities Act of 1933.
I was advised by the staff to
furnish you promptly with 7 xerox copies of the letter, which are enclosed, and
I ask that the matters raised in the letter be given as prompt attention as
possible.
Very truly yours,
Samuel Bergman
SB:nrb
Enclosures
STAFF REPLY LETTER
JUL 1 1981
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Hadron, Inc.
Incoming letters dated June 5 and 25, 1981
On the basis of the facts presented in your letter, and particularly noting that
the recipients of the Companys common stock in March 1979 were not aware at the
time that their shares may have been issued in violation of Section 5 of the
1933 Act, this Division will raise no objection if the Rule 144 holding period
for such persons is deemed to have commenced in March 1979 without any
subsequent tolling thereof. This position applies only to the situation
described in your letter. Further, it should be noted that different facts and
circumstances might require a different conclusion.
Sincerely,
Ann M. Glickman
Special Counsel
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