On May 23, 2007, the Securities and Exchange Commission (the “SEC”) proposed amendments to several rules and regulations under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In general, these proposals would provide increased liquidity to investors who acquire restricted securities.

Rules 144 and 145 under the Securities Act provide safe harbors for resales of securities under certain conditions. The SEC’s proposals would improve liquidity for investors who acquire “restricted securities,” which are typically securities not acquired in a public offering, by shortening holding periods and easing restrictions on public resales. As a preliminary matter, the SEC proposes to add a note to both rules that the safe harbors provided are not available with respect to any transaction or series of transactions that, while in technical compliance with the rule, is part of a plan to evade the registration requirements of the Securities Act.

Comments are due on this proposal by September 4, 2007. The SEC will then consider the comments and may submit a final rule proposal to the Commission for approval. Any necessary transition rules to address currently outstanding securities would be a part of the final rule proposal.

Reduced Holding Period for Reporting Companies

The SEC proposes to reduce the holding period for restricted securities of a reporting company under Rule 144 from one year to six months for both affiliates and non-affiliates, provided that the issuer has been a reporting company for at least 90 days before the sale of the securities. Because this shortened holding period would make hedging transactions significantly easier, the SEC also proposes to suspend, or toll, the holding period during any period in which the holder engages in certain hedging activities, with a maximum holding period of one year, regardless of any hedging activity. The current one-year holding period would continue to apply to non-reporting companies.

Resales by Affiliates under Rule 144

Under the proposed amendments, affiliates of reporting companies would be prohibited from resales of securities during the six-month holding period (which may extend to one year if the affiliate engages in certain hedging transactions), but may resell in accordance with the requirements of Rule 144 after the holding period ends. Resales by affiliates of non-reporting companies are prohibited during the one-year holding period but are allowed in accordance with the Rule 144 requirements after the holding period ends.

Resales by Non-Affiliates under Rule 144

The proposed rules would permit a person who has not been an affiliate of a reporting company for three months prior to the sale of the securities to resell restricted securities after the six-month holding period, subject only to the current public information requirement of Rule 144. After a one-year holding period, those who are non-affiliates (and have not been for three months prior to the sale) may engage in unlimited public resale under Rule 144 of restricted securities of both reporting and non-reporting companies.

Elimination of Manner of Sale Limitations for Debt Securities

In a Rule 144 sale, securities must be sold in “brokers’ transactions,” with brokers acting as gatekeepers to ensure selling shareholders comply with the requirements of Rule 144. The SEC believes that the fixed income securities market does not have the same potential for abuse as the equity market and therefore proposes to eliminate the manner of sale limitations for resales of debt securities. The SEC also proposes to include non-participating preferred stock and assetbacked securities in the category of “debt securities” only for purposes of the manner of sale revisions to Rule 144.

Form 144 Thresholds and Overlap with Form 4

Finally, the SEC proposes to increase the filing thresholds found in Rule 144(h). Currently, a selling security holder must file Form 144 if the intended sale exceeds 500 shares or $10,000 within a three-month period. The SEC is proposing to eliminate the Form 144 filing requirement for non-affiliates and increase the thresholds for affiliates to 1,000 shares or $50,000. Because affiliates are often insiders under Section 16 of the Exchange Act, the SEC is soliciting comments on how best to coordinate the required content and filing deadlines of Form 144 and Form 4 and how to permit persons who are subject to Section 16 of the Exchange Act to satisfy their Rule 144 filing requirements, at their option, by filing a Form 4.

Codification of Several Staff Positions

The SEC also proposed amendments codifying various staff positions issued by the Division of Corporation Finance, as follows:

1. Securities acquired from the issuer pursuant to an exemption from registration under Section 4(6) of the Securities Act are “restricted securities” under Rule 144.

2. In transactions made solely to form a holding company, holders may tack the period the securities are held before the transaction provided that the following conditions are met:

a. The newly formed holding company’s securities are issued solely in exchange for the securities of the predecessor company as part of a reorganization into a holding company structure;

b. Security holders receive securities of the same class evidencing the same proportional interest in the holding company with substantially the same rights as the predecessor company securities; and

c. Immediately following the transaction, the holding company has no significant assets other than securities of the predecessor.

3. If securities sold were acquired from the issuer solely in exchange for other securities of the same issuer, the newly acquired securities will be deemed to have been acquired at the same time as the securities surrendered for conversion or exchange, provided the following conditions are met:

a. The original securities do not permit cashless conversion or exchange by their terms;

b. The parties amend the securities to provide for cashless conversion; and

c. The securityholder provides consideration other than securities of the issuer for the amendment.

4. Upon a cashless exercise of options or warrants, the underlying securities will be deemed to have been acquired when the options or warrants were acquired, under certain conditions. This provision would not apply to certain options or warrants that are not purchased for cash or property (e.g., employee stock options).

5. A pledgee of securities may sell the pledged securities without having to aggregate the sale with that of other pledgees of the same securities from the same pledgor, as long as the pledgees are not acting in concert.

6. Rule 144 is not available for resales by companies that are, or previously were, “shell companies” (including blank check companies) until (a) the issuer has ceased to be a shell company; (b) the issuer is subject to the reporting requirements of the Exchange Act; (c) the issuer has filed all reports during the preceding 12 months; and (d) at least 90 days have passed since the issuer filed a notification with the SEC that it is not a shell company. The definition of “shell company” for this purpose would be expanded from the definition in Rule 405, as it would apply to any “issuer” rather than any “registrant.”

7. The Form 144 representation may be modified to indicate that a selling security holder had no knowledge of material adverse information about the issuer as of the date on which the holder adopted the written trading plan or gave the trading instructions, specifying that date and indicating that the representation speaks to that date.

Amendments to Rule 145

Rule 145 under the Securities Act currently provides that exchanges of securities in connection with a reclassification, merger, consolidation or transfer of assets subject to a shareholder vote constitute sales of those securities and deems persons party to such transactions (other than the issuer and their affiliates) to be underwriters. Resales by these presumed underwriters are restricted under Rule 145(d). The SEC proposes to eliminate the presumptive underwriter provision except for transactions involving shell companies (except for a business combination related shell company). Parties to such a transaction, other than the issuer and their affiliates, could only resell securities acquired in connection with the transaction pursuant to the requirements of Rule 145(d), which would be harmonized with the limitations on shell companies proposed under Rule 144 (see number 6 above). These presumed underwriters would therefore be permitted to resell their securities to the same extent as affiliates of a shell company under Rule 144.

Text of Releases

The proposed rule releases may be found on the SEC’s website using the following link: http://sec.gov/rules/proposed.shtml. The items summarized above are only a few of the specific issues addressed by the releases. We urge you to read the releases in their entirety and contact any of the individuals listed below if you have questions on any of the items. If the proposed rules are adopted, we will supplement this legal alert to describe the final rules and any important transition dates.