Company Name: Xonics, Inc.
Public Availability Date: Oct. 21, 1974

[INQUIRY LETTER]

WENKE, BURGE & TAYLOR

SOUTHERN CALIFORNIA FIRST NAT'L BANK BUILDING, SUITE 801, 1055 NORTH MAIN ST.

SANTA ANA, CALIFORNIA 92701

(714) 835-3338

August 29, 1974

Office of Chief Counsel

Division of Corporate Finance

Securities and Exchange Commission

Washington, D.C. 20549

Re: Request for an Interpretive Opinion of Rule 144 under the Securities Act of 1933

Gentlemen:

We are requesting an opinion as to whether Rule 144 requires a divorced woman to aggregate her sales of securities during any six month period with sales of her former husband where such shares were received in connection with a divorce proceeding under the following conditions:

The former husband, Dr. Hooker, is a founder, the President and a Director of Xonics, Inc. and received unregistered shares of common stock of Xonics, Inc. in 1971 pursuant to the exemption from registration contained in Section 4(2) of the Act. In August, 1972, the parties were divorced and the former wife, Ms. Downs, was awarded shares of Xonics, Inc. common stock. In connection with the divorce, the court ordered the parties to create and enter into a stock agreement, a copy of which is enclosed herewith. The Stock Agreement provides that so long as Ms. Downs is the record or beneficial owner of the stock, Dr. Hooker can vote the shares in the exercise of his best judgment in the interest of Xonics, Inc. The voting rights of Dr. Hooker terminate upon the sale or other disposition of said shares by Ms. Downs. In addition, the stock agreement provides that Dr. Hooker has a right of first refusal to purchase shares owned by Ms. Downs (i) at the same price for which she has an offer which she desires to accept; or (ii) at the closing bid price of the stock for the day preceding the exercise by Dr. Hooker of his right of first refusal should she desire to sell her shares on an exchange. Ms. Downs and Dr. Hooker are the only parties to the Stock Agreement and she is required to give notice to him in the event she desires to sell any of her shares. Subject to this right of first refusal, the Stock Agreement provides that Ms. Downs may freely transfer or otherwise dispose of her shares in her sole discretion in accordance with applicable state and federal rules and regulations.

With respect to the relationship between Ms. Downs and Dr. Hooker as former spouses, an interpretive opinion from your office, dated March 29, 1974, stated that a divorced woman will not be required to aggregate her sales during any six month period with those of her former husband, assuming they are not acting in concert.

It is our view that the Stock Agreement does not require aggregation and that neither voting rights nor right of first refusal in the present case would constitute the parties as persons agreeing to act in concert for purposes of Section (e)(3)(F) of Rule 144, particularly in view of the divorce proceeding from which the Stock Agreement resulted. The existence of the voting rights in Dr. Hooker should not require aggregation within the meaning of Section (e)(3)(F) since that provision is directed towards persons agreeing to act in concert for the purpose of selling, rather than voting securities.

It is also our opinion that the existence of this option in Dr. Hooker is not the type of agreement for the purpose of selling securities contemplated by the above section. This option cannot operate to frustrate the purpose or policy of Rule 144, since in no event can the option cause any additional shares to enter the trading market that could not otherwise be sold by the parties in the absence of the option. The Stock Agreement expressly permits Ms. Downs to dispose of any or all of her shares in her sole discretion and there is no agreement, arrangement or understanding of any kind with Dr. Hooker that will govern her decision to sell her shares.

Ms. Downs desires to sell the maximum quantity of shares permissible pursuant to Rule 144 during any six month period and we would appreciate your opinion. Assuming that all other terms and conditions of Rule 144 are met, does the existence of the voting rights and right of first refusal in the Stock Agreement require sales by Ms. Downs to be aggregated with sales of Dr. Hooker for purposes of the quantity limitations of Rule 144?

If any additional information should be required, please contact the undersigned by a collect call at (714) 835-3338.

Very truly yours,

John F. Evans of

WENKE, BURGE & TAYLOR

JFE/dv

cc/ Franklin M. Desser, Esq.

Ms. Gladys Downs

[STAFF REPLY LETTER]

September 20, 1974

John F. Evans, Esq.

Wenke, Burge & Taylor

Southern California First National Bank Building

Suite 801

1055 North Main Street

Santa Ana, California 92701

Re: Xonics, Inc.

Dear Mr. Evans:

This is in response to your letter of August 29, 1974 requesting our concurrence with your interpretation of Section (e)(3)(F) of Rule 144, as applied to the sale of securities by a divorced woman who received restricted shares of stock from her former husband in connection with a property settlement agreement.

You indicate in your letter, that Ms. Downs was awarded 45,000 shares of the above-mentioned company's common stock pursuant to a divorce [ Original Text Illegible ] in August, 1972. The "Xonics Stock Agreement" entered into pursuant thereto provides for Ms. Downs to be the record and beneficial owner of the stock; and for Dr. Hooker, her ex-spouse and an affiliate of the company, to have the right to vote the shares until they are sold or otherwise disposed of by Ms. Downs and the right of first refusal at the offered price or if none the bid price should she desire to sell any of her shares. Subject to this right of first refusal Ms. Downs may freely transfer or otherwise dispose of her shares in her sole discretion in accordance with applicable state and federal rules and regulations.

Because Dr. Hooker retains the right to decide whether any shares Ms. Downs wishes to sell will be offered to the public, this Division is unable to conclude that sales by her and by him at or about the same time would not be made in concert and, accordingly, aggregated under Rule 144(e)(3)(F) to determine the amount of shares she may sell pursuant to the rule.

Sincerely,

Norman Schou

Attorney Adviser