VK/AC Holding, Inc. , (Aug. 22, 1996)

INQUIRY LETTER
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NY 10022
TELEPHONE (212) 909-6435

August 21, 1996

Securities Act of 1933,
Sections 2(3), 2(11) and 5
Rule 144(a)(3)

Office of Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

VK/AC Holding, Inc.

Ladies and Gentlemen:

We are counsel to VK/AC Holding, Inc., a Delaware corporation ("VKAC"), in connection with the proposed distribution (the "Distribution") by VKAC to its common stockholders of all of the outstanding shares of the Class A common stock, par value $.01 per share (the "MGI Class A Common Stock") of MCM Group, Inc. ("MGI"), a Delaware corporation to be formed by VKAC for the purpose of holding all of the outstanding common stock of McCarthy, Crisanti & Maffei, Inc., a New York corporation ("MCM"), which is currently a wholly-owned subsidiary of VKAC.

On behalf of VKAC, we respectfully request that the Division of Corporation Finance (the "Division") either (a) concur in our opinion that the Distribution would not constitute a "sale" of the securities to be distributed to holders of VKACs common stock under Section 2(3) of the Securities Act of 1933, as amended (the "Securities Act"), and that VKACs role in the Distribution will not make it an "underwriter" as defined in Section 2(11) of the Securities Act or (b) confirm that it will not recommend to the Securities and Exchange Commission (the "Commission") any enforcement action if the Distribution is effected without registration of the MGI Class A Common Stock under Section 5 of the Securities Act. We also respectfully request that the Division confirm that, in view of the transfer restrictions to be placed on the shares of MGI Class A Common Stock distributed to VKACs stockholders in the Distribution, which restrictions will remain in effect until MGI has registered the MGI Class A Common Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such shares would not be "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. This letter supplements and supersedes our prior letter to the Division dated June 14, 1996 and responds to certain questions raised by Anne Krauskopf, Esq. of the Staff in telephone conversations with the undersigned.

I. BACKGROUND AND DESCRIPTION OF PROPOSED DISTRIBUTION

VKAC has provided us with, and has authorized us to make on its behalf, the factual representations set forth below.

A. VKAC

VKAC, through its subsidiaries, is a marketer and provider of investment advisory and administrative services to open-end and closed-end investment companies, unit investment trusts and institutional clients. VKACs principal operating subsidiary, Van Kampen American Capital, Inc., was formed through the combination in December 1994 of The Van Kampen Merritt Companies, Inc. ("VKM") and American Capital Management & Research, Inc. ("American Capital"), which was founded in 1926 as one of the first investment management companies in the United States.

VKACs authorized capital stock consists of 3,250,000 shares of Class A common stock, par value $0.01 per share (the "VKAC Class A Common Stock"), 3,250,000 shares of Class B common stock, par value $0.01 per share (the "VKAC Class B Common Stock" and, together with the VKAC Class A Common Stock, the "VKAC Common Stock") and 32,500 shares of Junior Non-Cumulative Participating Preferred Stock, par value $200 per share (the "Junior Preferred Stock"). As of June 30, 1996, the Company had outstanding 2,317,474 shares of VKAC Class A Common Stock, 117,817 shares of VKAC Class B Common Stock and 32,500 shares of Junior Preferred Stock. As of June 30, 1996, there were approximately 180 holders of record of VKAC Class A Common Stock, one holder of record of VKAC Class B Common Stock and one holder of record of Junior Preferred Stock. The VKAC Class B Common Stock is identical to the VKAC Class A Common Stock in all respects except as to voting and certain conversion and exchange rights. The holders of VKAC Class B Common Stock have no right to vote.

As of June 30, 1996, approximately 87% of the outstanding VKAC Common Stock was held by The Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D Fund IV"), a private investment fund managed by Clayton, Dubilier & Rice, Inc. ("CD&R"), which in February 1993 led the acquisition of VKM from Xerox Financial Services, Inc. in a leveraged buyout transaction. Of the remaining shares of VKAC Common Stock outstanding as of June 30, 1996, approximately 4.8% and 1.4% were held by two financial institutions, respectively, approximately 6% was held by approximately 165 current executive officers and employees (including four former employees) of VKAC and its subsidiaries ("Management Stockholders") and less than 1% was held by four non-employee directors of VKAC, two family trusts established by a Management Stockholder and ten current and former chief executive officers and directors of other companies in which investment funds managed by CD&R have invested.

As a result of the sale in 1993 in a registered public offering of 9 3/4% Senior Secured Notes due 2003 of Van Kampen American Capital, Inc. (the "Notes"), which were guaranteed by VKAC, VKAC files periodic reports under Section 15(d) of the Exchange Act. MCM is not a guarantor of the Notes or any of VKACs other obligations and the spin-off of MGI is not expected to have an adverse effect on the ability of VKAC or Van Kampen American Capital, Inc. to service its outstanding indebtedness or meet its other obligations. The Distribution will not result in any violation of the covenants contained in the indenture governing the Notes, give any holder of Notes any right to require the repurchase of any Notes or otherwise require any payment to be made in respect of such Notes.

B. MCM and MGI

MCM and its subsidiaries provide specialized on-line financial information and analysis relating to developments in the U.S. and international corporate securities, fixed income and currency markets. MCMs services are generally delivered electronically to subscribers via various vendors of electronic information services, including ADP Financial Information Services, Inc., Bloomberg L.P., Dow Jones Telerate (previously Telerate Systems Incorporated), Kabushiki Kaisha Quick, Knight-Ridder Financial, Inc., MVIS Corporation and Reuters Limited. Subscribers to MCMs electronic information services consist almost exclusively of institutional clientele (e.g., major banks, brokers, dealers, government bond and financial futures trading operations, foreign exchange trading operations, and treasury departments of major corporations). In addition to MCMs headquarters in New York, MCM and its subsidiaries maintain offices in Boston, London, Paris, Tokyo, Hong Kong and Singapore.

VKAC has owned MCM directly or indirectly since 1985. Following the sale of its credit analysis and ratings division in 1991, MCM has not disposed of any lines of business or made any substantial asset purchases or sales. Since 1991, MCM has focused on developing its electronic information services business, which began in 1980 and today includes CorporateWatch_sr, a leading provider of up-to-the-minute information regarding the new issue corporate securities market; MoneyWatch_sr, a service that provides on-going analysis of developments in the U.S. Treasury, agency and money markets; CurrencyWatch_sr, a service that provides analysis of intraday developments in the foreign exchange markets; and YieldWatch_sr, a service that analyzes intraday developments in the European and Asia Pacific government bond and money markets. MCM has also recently introduced three other services: FX OptionWatch_st, which provides fundamental and technical analysis of global currency option markets; TradeWatch_sr, which provides longer term trading recommendations for government securities, currencies, equities, commodities and other financial instruments; and KinriWatch_st, a Japanese- language service that provides fundamental and technical analysis of the Japanese government bond and money markets.

MCM currently has authorized capital stock consisting of 20,000 shares of common stock, par value $1.00 per share, of which 7,600 shares are outstanding and are held by VKAC (the "MCM Stock").

It is expected that MGI will be incorporated with an authorized share capital consisting of three classes of common stock: the MGI Class A Common Stock; Class B common stock, par value $0.01 per share (the "MGI Class B Common Stock"); and Class C common stock, par value $0.01 per share (the "MGI Class C Common Stock"). The MGI Class B Common Stock and the MGI Class C Common Stock will be identical to the MGI Class A Common Stock in all respects except that the MGI Class B Common Stock will not have voting rights and each class of common stock will be subject to different exchange or conversion provisions as follows:

The MGI Class A Common Stock will be exchangeable for MGI Class B Common Stock only in connection with a distribution by C&D Fund IV to one or more of its limited partners which is restricted by applicable law as to the amount of voting securities it may hold in an entity.

The MGI Class B Common Stock may be issued only in connection with an exchange of shares of Class A Common Stock under the limited circumstances described above. The Class B Common Stock may, at the option of the holder and subject to certain restrictions, be converted into MGI Class A Common Stock and will automatically convert into MGI Class A Common Stock upon transfer to any person other than an affiliate of the transferor. The MGI Class B Common Stock is intended to meet the needs of several investors in C&D Fund IV that may be subject to limitation under applicable laws on their ability to hold more than a specified percentage of the voting stock of MGI in the event that C&D Fund IV distributed shares of MGI Class A Common Stock to such investors.

The MGI Class C Common Stock will automatically convert into MGI Class A Common Stock upon sale or transfer to an underwriter in connection with the consummation of a public offering of the MGI Class A Common Stock pursuant to an effective registration statement under the Securities Act or to any person at any time after the MGI Class A Common Stock has been registered under Section 12 of the Exchange Act. As discussed below, in connection with the Distribution, shares of Class C Common Stock are expected to be issued to executive officers and certain employees of MCM in a management stock offering exempt from the registration requirements of the Securities Act. Such shares of MGI Class C Common Stock will be "restricted securities" within the meaning of Rule 144(a)(3) and will be subject to additional restrictions on transfer under the management stock subscription agreements pursuant to which such shares will be issued.

Prior to the Distribution, VKAC will incorporate MGI and will transfer the MCM Stock to MGI in exchange for shares of MGI Class A Common Stock. In the Distribution, holders of VKAC Common Stock will receive shares of MGI Class A Common Stock at a ratio currently expected to be in the range of 0.0821 to 0.1643 shares of MGI stock for each share of VKAC stock, with cash being distributed in lieu of fractional shares. Holders of VKAC Class A Common Stock and holders of VKAC Class B Common Stock will participate equally, share for share, in the Distribution, and all holders will receive shares of MGI Class A Common Stock. There will be no investment decision by any VKAC stockholder because the proposed Distribution is a dividend for which stockholder approval is not required nor being sought. VKAC has engaged a firm of independent appraisers to aid the Board of Directors of VKAC in determining the current fair market value of MCM, which value will be disclosed to VKAC stockholders in the information statement to be provided at the time of the Distribution.

C. The Distribution

During 1995, VKAC, working together with its investment banking advisors, began to investigate various competitive strategies and the future structure of the company. Among the strategic transactions under consideration (each a "Potential Transaction") were a possible private sale of VKAC and the sale by certain stockholders of a portion of their VKAC Common Stock through an underwritten public offering. On June 6, 1996, VKAC filed with the Commission a registration statement on Form S-1 with respect to a potential public offering of up to $250 million of VKAC Common Stock by certain stockholders of VKAC. Shortly thereafter, VKAC commenced negotiations with prospective purchasers of the company and, on June 21, 1996, VKAC signed an Agreement and Plan of Merger among VKAC, Morgan Stanley Group Inc. ("Morgan Stanley"), MSAM Holdings II, Inc. and MSAM Acquisition Inc. (the "Merger Agreement") pursuant to which VKAC will be sold to Morgan Stanley by means of a merger (the "Merger") of MSAM Acquisition, Inc. into VKAC. The Merger has been approved by the written consent of VKACs majority stockholder, C&D Fund IV, and is expected to close prior to the end of 1996. Accordingly, VKAC intends to withdraw the registration statement on Form S-1 filed on June 6, 1996.

In connection with its evaluation of Potential Transactions, VKAC was advised by its financial advisors that, because MCMs electronic information services business falls outside of VKACs core mutual fund and investment advisory business, VKAC would not be able to recognize the full market value of MCM as a going concern in a Potential Transaction so long as it remained a wholly-owned subsidiary of VKAC. VKAC determined that a spin-off of MCM to VKACs stockholders was essential to maximize the value of MCMs business to VKACs stockholders. Accordingly, at a meeting held on June 4, 1996, the Board of Directors of VKAC authorized the company to effect a spin-off of MCM to VKAC stockholders in proportion to their respective holdings of VKAC Common Stock. Neither the Delaware General Corporation Law nor the Third Restated Certificate of Incorporation or By-Laws of VKAC requires a vote of VKACs stockholders to approve the Distribution, and no such vote has been or will be sought. The Distribution is expressly permitted by the terms of the Merger Agreement.

No VKAC stockholder will be required to pay any cash or other consideration for the MGI Class A Common Stock received in the Distribution or to surrender or exchange VKAC Common Stock in order to receive shares of the MGI Class A Common Stock.

Other than certain headquarters services provided by VKAC to MCM, there have historically been no significant intercompany transactions between VKAC or its subsidiaries and MCM or its subsidiaries, and it is not expected that the companies will transact substantial business with each other in the future. MCM does not have any outstanding indebtedness for borrowed money, and the spin-off is not expected to have an adverse effect on MCMs ability to meet its other obligations. In connection with the Distribution, VKAC, MGI and MCM will enter into a services agreement pursuant to which VKAC will provide certain administrative, financial and tax accounting, legal, human resources and other services on a cost-plus basis to MGI and MCM during a transition period that is not expected to exceed two years.

Following the Distribution, none of the officers of VKAC will be an officer of MGI or MCM. During the interim period between the Distribution and the closing of the Merger, it is expected that one person who is both an officer and director of VKAC and three other directors of VKAC will continue to serve as directors of MGI and MCM. After the closing of the Merger and in light of expected changes in the directors of VKAC, it is expected that only one member of the MGI and MCM boards of directors will be an officer of VKAC.

In connection with the Distribution, it is expected that MGI will adopt stock and option plans that will permit executive officers and certain employees of MCM to acquire shares of MGI Class C Common Stock in transactions exempt from the registration requirements of the Securities Act. As noted above, the shares of MGI Class C Common Stock will be "restricted securities" within the meaning of Rule 144(a)(3). The management stock subscription agreements (the "Management Agreements") pursuant to which such shares will be issued shall provide that no transfer will be permitted at any time unless (i) such disposition is pursuant to an effective registration statement, (ii) the holder delivers an opinion of counsel to the effect that the disposition is exempt from Section 5 of the Securities Act or (iii) a no-action letter from the SEC has been obtained with respect to such disposition. In addition, such Management Agreements shall provide for a number of contractual restrictions that will remain in effect until there is an underwritten public offering. Except as specifically provided in such Management Agreements, the shares of MGI Class C Common Stock may not be sold, assigned, transferred, pledged or otherwise directly or indirectly disposed of or encumbered other than a transfer by operation of law to the estate of the holder upon such holders death, provided that such estate agrees to be bound by appropriate transfer restrictions. The Management Agreement specifically permits transfers of such shares only (i) following compliance with rights of first refusal in favor of MGI and C&D Fund IV, (ii) in conjunction with certain "take-along" rights to C&D Fund IV arising in connection with the sale of the Company, and (iii) to MGI or C&D Fund IV following termination of such management investors employment or in the event of unforeseen personal hardship (as defined in such agreements). A legend indicating that the shares of MGI Class C Common Stock are subject to the restrictions on transfer included in the Management Agreements will be noted conspicuously on the certificates evidencing the MGI Class C Common Stock.

It is also expected that MGI will adopt a special option plan providing for a one time special grant of options to purchase shares of MGI Class A Common Stock (the "Special MCM Options") to those Management Stockholders who currently hold options to purchase shares to VKAC Class A Common Stock (the "VKAC Options") and to approximately twelve additional employees of VKAC and its subsidiaries who also hold VKAC Options under existing VKAC option plans. The special option plan is a compensatory plan designed to provide a special bonus for VKAC employees payable in MCM options. There are no current VKAC option plans relating to the VKAC Class B Common Stock or the Junior Preferred Stock. Under the terms of the Special MCM Options, unless MGI has a class of equity securities that have been registered under Section 12 of the Exchange Act and the shares of MGI Class A Common Stock issuable upon the exercise of the Special MCM Options (the "Special Option Shares") are registered under the Securities Act, the exercise of the Special MCM Options and purchase of the Special Option Shares will be permitted only pursuant to an exemption from the registration requirements of the Securities Act. Unless issued pursuant to an effective registration statement under the Securities Act, such Special Option Shares will also be "restricted securities" within the meaning of Rule 144(a)(3). In addition, since such Special Option Shares will be shares of MGI Class A Common Stock, they will be subject to the same restrictions on transfer (described below) that will apply to the shares to be distributed in the Distribution.

D. Absence of Market and Transfer Restrictions

There is not presently and has never been a public market for any class of equity securities of VKAC, MCM or MGI, and the Distribution is not intended to result in or create a market in the shares of VKAC, MCM or MGI. In order to assure that a market will not develop for the MGI Class A Common Stock prior to the time MGI has registered the MGI Class A Common Stock under Section 12 of the Exchange Act, MGI will provide in its Certificate of Incorporation that the MGI Class A Common Stock may not be transferred prior to such time except in the case of "permitted transfers". The term "permitted transfers" will be defined as transfers or assignments: (i) by VKAC to its common stockholders pursuant to the Distribution; (ii) to MGI or its affiliates; (iii) to existing stockholders of MGI who were stockholders of VKAC and received MGI Class A Common Stock in the Distribution; (iv) by bequest or the laws of descent or distribution; (v) in connection with a transfer to an unaffiliated third party pursuant to a merger, consolidation, stock for stock exchange, tender offer or similar transactions; (vi) to a trust for employees of MGI and its subsidiaries established under a qualified employee benefit plan; (vii) by a trust to the trusts beneficiaries; (viii) for cash only in transactions which would be exempt from the registration requirements of Section 5 of the Securities Act by virtue of the exemption provided by Section 4(2) of the Securities Act if the transferor were the issuer of the shares, provided that the transferee is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act, subject, in certain cases, to compliance with rights of first offer in favor of MGI and C&D Fund IV and to certain "take-along" rights of C&D Fund IV; or (ix) pursuant to an effective registration statement under the Securities Act simultaneously with a registration of the MGI Class A Common Stock under Section 12 of the Exchange Act. As noted below, in the transfers under clause (i) pursuant to the Distribution, the transfer restrictions on the MGI Class A and Class B Common Stock will be disclosed in the information statement to be provided at the time of the Distribution, and a copy of the Certificate of Incorporation will be attached to such information statement. Transfers under clauses (ii) (other than to MGI), (iii), (iv), (v), (vi), (vii) and (viii) would be subject to the transferee agreeing to be bound by the same restrictions on transfer; provided that transferees under clause (v) shall not be required to agree that in order for any subsequent transfer by them to qualify as a "permitted transfer" of the type contemplated by clause (viii) such transfer must be for cash or to agree that such transfers would be subject to compliance with the rights of first offer and "take along" rights referred to in clause (viii). The same restrictions on transfer discussed in this part I.D will apply not only to the MGI Class A Common Stock distributed in the Distribution, but also, as noted above, to the Special Option Shares and to the MGI Class B Common Stock (which, as noted above, may be issued in exchange for MGI Class A Common Stock under very limited circumstances) and any shares subsequently issued as a result of any stock split, stock dividend or similar distribution made in respect of such shares of MGI Class A Common Stock or MGI Class B Common Stock.

The foregoing restrictions on transfer will be included in the Certificate of Incorporation of MGI and disclosed to VKAC stockholders in the information statement to be provided at the time of the Distribution, and appropriate stop transfer instructions will be noted on the stock transfer books of MGI. A legend indicating that the shares of MGI Class A and Class B Common Stock are subject to restrictions on transfer included in MGIs Certificate of Incorporation will be noted conspicuously on the certificates evidencing the MGI Class A and Class B Common Stock. Restrictive legends of this sort are similar to the standard types of legends used by issuers in private placement transactions to ensure that no public market in the issuers securities develops and, accordingly, should be sufficient for purposes of ensuring that no public market will develop in MGI Class A and Class B Common Stock prior to the registration of the MGI Class A and Class B Common Stock under Section 12 of the Exchange Act.

E. Information Statement

At the time of the Distribution, VKAC will send to each VKAC stockholder an information statement (the "Information Statement") prepared substantially in accordance with Schedule 14C promulgated under the Exchange Act.

II. DISCUSSION

Sections 2(3), 2(11) and 5

In our opinion there are several legal and policy reasons why the Division should either (i) concur that the Distribution of MGI Class A Common Stock to stockholders of VKAC would not involve a "sale" under Section 2(3) of the Securities Act and, therefore, that registration of such stock should not be required under Section 5 of the Securities Act and VKACs role in the Distribution will not make it an "underwriter" as defined in Section 2(11) of the Securities Act, or (ii) confirm that it will not recommend that any enforcement action be taken by the Commission if the Distribution is effected without registration of the MGI Class A Common Stock under the Securities Act.

Under Section 5 of the Securities Act, a registration statement must be filed with the Commission prior to a "sale" of securities. Section 2(3) defines the term "sale" as "every contract of sale or disposition of a security . . . for value." Implicit in this definition is the concept that no "sale" takes place where a stockholder is not required to make a decision to place additional value at risk in order to obtain ownership of a security.

We believe that the Distribution will not constitute a "sale" of a security because, among other reasons, there will be no disposition of securities for value. VKAC stockholders will not provide any consideration to VKAC in exchange for the MGI Class A Common Stock they will receive. In addition, there will not be any investment decision by any VKAC stockholder because the proposed Distribution is a dividend for which stockholder approval is neither required nor being sought.

Courts have held spin-off transactions, under certain circumstances, to constitute a "sale" requiring registration under the Securities Act. In each of Securities and Exchange Commission v. Harwyn Industries Corp., 326 F. Supp. 943 (S.D.N.Y. 1971), and Securities and Exchange Commission v. Datronics Engineers, Inc., 490 F.2d 250 (4th Cir. 1973), cert. denied, 416 U.S. 937 (1974), the court found that the purpose of the registration requirements would be violated where (i) the intent or effect of the spin-off transaction would be to create a public trading market in securities of a non-public company without having to register the shares and (ii) such trading would take place without the dissemination of adequate information regarding the spin-off or the securities.

The Distribution is clearly distinguishable from the transactions in Harwyn and Datronics. Most important, the Distribution will not involve the creation of a public trading market in securities of a non-reporting company as the MGI Class A and Class B Common Stock will contain significant restrictions on transfer to ensure that such a public trading market does not develop prior to the registration of the MGI Class A Common Stock under Section 12 of the Exchange Act. In addition, in contrast to Harwyn and Datronics, VKAC stockholders will not suffer from inadequate information regarding the Distribution and the MGI Class A Common Stock as they will receive the Information Statement at the time of the Distribution, which will substantially comply with the requirements of Schedule 14C. Finally, as contrasted to Harwyn and Datronics, the primary reason for the Distribution is not to create a public trading market in MGI Class A Common Stock but to increase stockholder value though the creation of a stand-alone company.

We are also aware of the concerns of the Commission and the Division with regard to spin-offs of securities and the possibility of abuse, such as was found in Harwyn and Datronics. Nonetheless, the Division has recognized that spin-offs involving non-reporting companies may be accomplished without registration. See, e.g., Integral Systems, Inc. (available May 3, 1996); Continental Land & Fur, Inc. (available July 13, 1992); King Broadcasting Co. (available January 24, 1992); Mustang Fuel Corp. (available Aug. 25, 1986); S.C. Johnson & Son (available July 22, 1985); and Yarway Corp. (available December 19, 1984). While the Distribution of MGI Class A Common Stock would involve the distribution of shares of a non-reporting company, there is no intention to create a public trading market for MGI Class A Common Stock and the Distribution would not have such an effect. Furthermore, we believe that the Distribution as described in this letter would not involve any of the abuses which would require registration for the following reasons:

1. A vote of VKACs stockholders is nor required to approve the Distribution, and no consideration will be paid by VKACs common stockholders or received by VKAC in connection with the Distribution. The MGI Class A Common Stock will be distributed to the common stockholders of VKAC in precisely the same proportions as their holdings of VKAC Common Stock, except for cash paid in lieu of fractional shares of MGI Class A Common Stock.

2. The transaction will create a public trading market for the MGI Class A Common Stock. Transfer restrictions will be placed on the MGI Class A and Class B Common Stock so that a public trading market will not develop prior to the registration of the MGI Class A Common Stock under Section 12 of the Exchange Act.

3. At the time of the Distribution, each VKAC stockholder will receive the Information Statement, which will contain audited financial statements of MCM and other material information regarding MCM, MGI and the capital stock of MGI

4. There is an independent business reason for the Distribution. Creation of additional stockholder value has been considered a valid business purpose for the spin-off of a privately held subsidiary to parent company stockholders. See, e.g., Mustang Fuel Corp.

In conclusion, it is our opinion that the Distribution would not constitute a "sale" of securities under Section 2(3) of the Securities Act and, therefore, that registration of the MGI Class A Common Stock would not be required under Section 5 of the Securities Act and VKACs role in the Distribution would not make it an underwriter as defined in Section 2(11) of the Securities Act. We ask the Division concur in our opinion. Alternatively, as a matter of sound policy we ask the Division to confirm that it will not recommend to the Commission any enforcement action if the Distribution is effected without registration under the Securities Act. The staffs position would be principally based on the disclosure to be provided to VKAC stockholders, the fact that significant transfer restrictions would be placed on the MGI Class A and Class B Common Stock to ensure that a public trading market would not develop, the legitimate business purposes of the Distribution and the unnecessary expense of registration with no corresponding benefits to VKAC stockholders or to the public.

Rule 144(a)(3)

In our view, the shares of MGI Class A Common Stock to be distributed pursuant to the Distribution would not be "restricted securities" as defined in Rule 144(a)(3) because such securities would be acquired by the common stockholders of VKAC and would therefore be issued to the public. In light of the transfer restrictions to be placed on the MGI Class A Common Stock and the MGI Class B Common Stock discussed in part I(D) above, there is no compelling reason, in our view, to impose the holding period requirements of Rule 144 on the stockholders of VKAC who receive shares of MGI Class A Common Stock or otherwise to limit the ability of VKAC stockholders who are not affiliates of MGI to sell such securities. As discussed above, the transfer restrictions to be placed on the MGI Class A Common Stock and MGI Class B Common Stock should be sufficient to ensure that no public market will develop in MGI Class A Common Stock prior to the registration of the MGI Class A Common Stock under Section 12 of the Exchange Act. Once the MGI Class A Common Stock has been so registered and the transfer restrictions on such stock in MGIs Certificate of Incorporation have lapsed, there will be adequate current information concerning MGI available to the public. Under these circumstances, the MGI Class A Common Stock distributed in the Distribution would appear to us not to be "restricted securities" and, accordingly, VKAC stockholders who are not affiliates of MGI should be able to sell their shares (subject to the restrictions on transfer described in part I.D above) without complying with Rule 144 and VKAC stockholders who are affiliates of MGI should be able to sell (subject to the restrictions on transfer described in part I.D above) in compliance with Rule 144 but without regard to the holding period requirements of the Rule. Accordingly, we ask that the Division concur in our view that, in view of the transfer restrictions to be placed on the shares of MGI Class A Common Stock received by VKAC stockholders in the Distribution, which restrictions will remain in effect until MGI has registered the MGI Class A Common Stock under Section 12 of the Exchange Act, such shares would not be deemed "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act.

VKAC proposes to effect the Distribution prior to the end of August 1996 in order to have the Distribution completed prior to the consummation of the Merger. In light of the time constraints involved, we respectfully request that the Division review this letter on an expedited basis. Should you have any questions with respect to the foregoing or be unable to concur with the conclusions stated herein without additional discussion or information, please telephone the undersigned at (212) 909-6435 prior to providing any written response. In accordance with Release No. 33-6269, seven additional copies of this letter are enclosed.

Sincerely,

Paul S. Bird

STAFF REPLY LETTER

August 22, 1996

RESPONSE OF THE OFFICE OF CHIEF COUNSELDIVISION OF CORPORATION FINANCE

Re: VK/AC Holding, Inc. ("VKAC")
MCM Group, Inc. ("MGI")

Incoming letter dated August 21, 1996

Based on the facts presented, the Division will not recommend enforcement action to the Commission if VKAC, in reliance on your opinion as counsel, conducts the proposed distribution (the "Distribution") to VKACs common shareholders of shares of Class A common stock (the "MGI Class A Common Stock") of MGI without registration under Section 5 of the Securities Act of 1933 (the "Securities Act"). In reaching this conclusion we have noted your representations that: (1) VKACs common shareholders will receive an information statement prepared substantially in accordance with the requirements of Schedule 14C under the Securities Exchange Act of 1934 (the "Exchange Act"); and (2) transfer restrictions on the MGI Class A Common Stock will be instituted to ensure that no public market develops in the MGI Class A Common Stock prior to its registration under Section 12 of the Exchange Act.

Further, the Division is of the view that, in light of the transfer restrictions applicable to the MGI Class A Common Stock distributed to VKACs common shareholders in the Distribution, which restrictions will remain in effect until MGI has registered the MGI Class A Common Stock under Section 12 of the Exchange Act, such shares will not be "restricted securities" as defined in Rule 144(a)(3) under the Securities Act.

Because these positions are based on the representations made to the Division in your letter, it should be noted that different facts or conditions might require different conclusions. Moreover, as to the position regarding Securities Act registration, this response represents the Divisions position on enforcement action only and does not express any legal conclusions on the question presented.

Sincerely,

Anne M. Krauskopf
Special Counsel