Company Name: Optel Corporation
Public Availability Date: June 29, 1973

[INQUIRY LETTER 1]

BLUM, HAIMOFF, GERSEN, LIPSON & SZABAD

270 MADISON AVENUE

NEW YORK, NEW YORK 10016

(212) [ Original Text Illegible ]-6383

April 06, 1973

Office of Chief Counsel

Division of Corporation Finance

Securities and Exchange Commission

Washington, D. C. 20549

Re: Optel Corporation File No. 2-41410

Dear Sirs:

Enclosed is our request for a ruling with respect to the application of Rule 144(e)(3)(F). We are also enclosing for your convenience copies of the final prospectus and the supplementary information referred to in that request.

Very truly yours,

BLUM, HAIMOFF, GERSEN, LIPSON & SZABAD

HG:amg

Enc.

[INQUIRY LETTER 2]

BLUM, HAIMOFF, GERSEN, LIPSON & SZABAD

270 MADISON AVENUE

NEW YORK, NEW YORK 10016

TELEPHONE(212) [ Original Text Illegible ]-6383

April 06, 1973

April 6, 1973

Office of Chief Counsel

Division of Corporation Finance

Securities and Exchange Commission

Washington, D.C. 20549

Re: Optel Corporation File No. 2-41410

Dear Sirs:

On behalf of Optel Corporation (the "Company") we hereby request the Commission staff to issue an interpretative ruling concerning the applicability of Rule 144(e)(3)(F) which requires aggregation by persons agreeing to act in concert in the circumstances described below.

The narrow question presented for consideration is whether certain persons who purchased shared of the Company's Class A Cumulative Convertible Preferred Stock ("Class A Stock") in a private placement and who convert their shares into Common Stock and thereafter sell Common Stock of the Company in brokerage transactions under Rule 144 would be deemed persons who have acted in concert with all other persons who were purchasers of Class A Stock under Rule 144(e)(3)(F) for the purpose of selling their securities by reason of certain prior transactions in which the holders of the Class A Stock participated. The Company has reason to believe that several holders of its Class A Stock intend in the near future to surrender their shares of Class A Stock for conversion into Common Stock and to request that such Common Stock be transferred to purchasers from them in sales made pursuant to Rule 144. The stock transfer agent for the Common Stock will require an opinion of counsel for the Company before issuing new certificates to the transferees in connection with such sales under Rule 144. We are concerned as to the responsibility of the Company to police the transactions of the holders of the Class A Stock who seek to rely upon Rule 144 and as to our ability to issue an unqualified opinion to the transfer agent as to such proposed sales.

The Company sold shares of its Common Stock to the public through Underwriters pursuant to its Registration Statement on Form S-1 (No. 2-41410) which became effective June 21, 1972. Since that time, it has filed reports with the Commission pursuant to Section 15(d) of the Securities Exchange Act of 1934. The Company's Annual Report on Form 10-K for the year 1972 indicates that on December 31, 1972 there were outstanding 1,110,927 shares of its Common Stock.

In December 1969 the Company issued to a small group of investors (less than 20 persons) 200,000 shares of Class A Stock at a price of $5 per share in a private placement. The sale to these investors was made pursuant to a Stock Purchase Agreement dated December 10, 1969, between the Company and these investors, who are referred to in the Stock Purchase Agreement and herein as "purchasers". The Stock Purchase Agreement (a) required the Company to seek approval of the Purchasers for certain transactions, (b) granted to the Purchasers certain rights of registration of their securities and (c) granted the right to a majority in interest of the Purchasers to designate one or two directors and one or two members of any Executive Committed of the Company as long as the Purchasers continued to own specified percentages of the Class A Stock or of the Common Stock into which the Class A Stock was convertible. The manner in which the Purchasers were contacted by the Company and the relationship of the several Purchasers to each other, as known to the Company, are outlined briefly in supplementary information furnished to the staff of the Commission in connection with its review of the Company's registration statement in a memorandum identified as Schedule VIII forwarded to the Division of Corporation Finance with letter of transmittal from our firm dated November 10, 1971.

In March of 1971 all the Purchasers but one were parties to a Settlement Agreement which resolved certain disputes which had arisen among the directors and certain holders of Common Stock and Class A Stock of the Company. Brief descriptions of the dispute and of the provisions of the Settlement Agreement which, among other things, modified the rights of the Purchasers to elect directors are to be found in the Company's Prospectus dated June 21, 1972 under the captions "Management-Board of Directors" and "Certain Transactions" and in Schedule VIII, the supplementary information furnished to the Commission mentioned in the preceding paragraph. The provisions of the Settlement Agreement regarding election of directors expired in March 1972 and the provisions of the Stock Purchase Agreement granting the Purchasers certain rights to designate directors again became effective. At the Annual Meeting of Stockholders held on October 2, 1972, Lawrence Goldmuntz, a Purchaser and designee of the Purchasers, was elected as a director.

An agreement (the "Consent Agreement") was entered into in May of 1972 between the Company and the Purchasers who had signed the Settlement Agreement. The Consent Agreement was entered into for the purpose of obtaining certain approvals required for the first public offering by the Company. This Consent Agreement modified and extended the Purchasers' registration rights and the Purchasers who signed it agreed not to offer publicly (including sales pursuant to Rule 144) any of the Company's securities for a period of nine months after the closing of the underwritten public offering of the Company's common stock. The modification of the registration rights and restriction on sale of restricted securities were agreed to in order to induce the managing underwriter to proceed with the public offering and were intended to protect the market against disruptions caused by sales of relatively large amounts of securities during the nine months following the public offering.

The Consent Agreement also included a provision that, "subject to the receipt by the Company of an opinion of counsel satisfactory to the Company (based upon an interpretive release or a ruling by the Commission) to the effect that such provision would not constitute an agreement to act in concert for the purpose of selling securities...." all public sales by the Purchasers of restricted securities for a designated period would be made on reasonable prior notice to the Company through one broker selected by the Company and the Purchasers. No such opinion of counsel has been given and we have no knowledge of any request having been made for an interpretative ruling on this subject.

The minimum holding period under Rule 144(d) has been satisfied for all Purchasers and the nine months period following the public offering during which the Purchasers agreed to withhold their securities from the market expired at the end of March 1973. Several Purchasers, each acting on his own behalf, have indicated that they are considering converting their Class A Stock into Common Stock and selling such Common Stock pursuant to Rule 144.

We have already been advised by certain Purchasers, and are assuming for the purposes of this request, that each Purchaser who is anticipating a proposed sale under Rule 144 will represent that he is acting for himself alone, there will be no understanding or arrangement between him and the other Purchasers relating to his proposed sale, that he will be making his own independent sale decision based on his own business and investment considerations and that he will make such sales through a broker of his own selection.

We are familiar with certain published interpretations by the staff of the Commission relating to Comtech Laboratories, Inc. in which the relationships between certain joint participants in a private placement in conjunction with an agreement with the issuer (similar to the agreements between Optel and the Purchasers) which granted to the investor group certain rights, including the right to designate a director, were found to require aggregation by members of the investor group to determine the amount of securities that may be sold by all members of the group under Rule 144.

In view of these interpretations, there is some question as to whether the action taken together by the several Purchasers, for the purpose of acquiring their shares of Class A Stock and for the purpose of obtaining certain rights with a view to protecting their investment, forms a sufficient basis upon which to require aggregation of subsequent sales under Rule 144 by such Purchasers of shares of Common Stock of the Company.

The published Commission interpretations in the Comtech situation seem to stress the significance of the right of the group of investors to designate a director. One of the Purchasers, who is anticipating conversion and sale of Optel Common Stock under Rule 144, has indicated that he will waive all of his rights to participate in the rights granted to the Purchasers to protect their investment, including the right to designate a director or directors. Such waiver would not include his registration rights. If the Commission does view the existence of these rights, and particularly the right to designate a director, as significant in its determination, would the relinquishment of such rights by a member of the group warrant any different consideration than a Purchaser who has not expressly waived such rights?

We would appreciate your advice as soon as possible as to the staff's position with respect to this matter. If you require any further information we would very much appreciate your calling collect Herbert Goldenberg, Esq. of this office.

Very truly yours,

BLUM, HAIMOFF, GERSEN, LIPSON & SZABAD

HG:as

[STAFF REPLY LETTER]

May 30, 1973

Herbert Goldenberg, Esq.

Blum, Haimoff, Green, Lipson & Szabad

270 Madison Avenue

New York, New York 10016

Re: Optel Corporation

Dear Mr. Goldenberg:

This is in reference to your letter of April 6, 1973 requesting an interpretation of Rule 144(e)(3)(F) with respect to a proposed sale of the Common Stock of Optel Corporation ("Optel") by certain investors in the Class A Cumulative Convertible Preferred Stock ("Class A Stock"). We understand the material facts to be as follows:

In December of 1969 Optel issued to a small group of investors 200,000 shares of Class A Stock in a private placement. The sale to these investors was made pursuant to a Stock Purchase Agreement ("Stock Agreement") dated December 10, 1969 between Optel and the purchasers ("Purchasers"). In substance, the Stock Agreement: (1) requires Optel to seek the approval of the Purchasers for certain transactions, and (2) grants the right to a majority in interest of the Purchasers to designate one or two directors and one or more members of any Executive Committee of Optel as long as the Purchasers continue to own specified percentages of the Class A Stock or of the Common Stock into which the Class A Stock is convertible.

In March of 1971 all the Purchasers but one were parties to a Settlement Agreement resolving certain disputes which had developed among the directors and certain holders of the Common Stock and Class A Stock of Optel. The provisions of the Settlement Agreement modified the rights of the Purchasers to elect directors through March of 1972 when the Stock Agreement once again became in force. As a consequence, Lawrence Goldmuntz, a Purchaser and designee of the Purchasers who had resigned under the conditions of the Settlement Agreement was elected as a director of Optel. In May of 1972 an agreement ("Consent Agreement") was executed between Optel and Purchasers who had signed the Settlement Agreement. The Consent Agreement was concluded in anticipation of Optel's first public offering. The Consent Agreement modified and extended the Purchasers' registration rights and the Purchasers who signed it agreed not to offer publicly (including sales pursuant to Rule 144) any of Optel's securities for a period of nine months after the closing of the underwritten public offering of Optel's Common Stock. The Consent Agreement also provided that "subject to the receipt by the Company of an opinion of counsel... to the effect that such provision would not constitute an agreement to act in concert for the purpose of selling securities...", all public sales by the Purchasers of restricted securities for a designated period would be made with a reasonable prior notice to the Company through one broker selected by the Company and the Purchasers. No such opinion of counsel has been given.

It is represented that the minimum holding period under Rule 144(d) has been satisfied for all Purchasers, and the nine-month period following the public offering during which the Purchasers agreed to withhold their securities from the market expired at the end of March 1973. Several Purchasers have indicated they are considering converting their Class A Stock into Common Stock and selling such Common Stock pursuant to Rule 144. In selling their Common Stock, each of the Purchasers will represent that he is acting for himself without arrangement or understandings with any of the other Purchasers and on the basis of his own business and investment considerations.

On the basis of the facts presented, particularly the requirement in the Consent Agreement that all public sales by the Purchasers for a designated period be made on reasonable prior notice to the Company through one broker selected by the Company and the Purchasers, it is this Division's view that the members of the group of investors who purchased Class A stock in December 1969 would be subject to the aggregation requirement of paragraph (e)(3)(F) of Rule 144.

Sincerely,

Peter J. Romeo

Attorney Adviser