We are very concerned that requiring issuers to make filings as promptly as two business days after a stock purchase or Rule 10b5-1 plan adoption by an outside, independent director could result in numerous late filings. We believe that Item 10 reporting, if required at all, should not apply with respect to non-employee directors because requesting and collecting the necessary information from outside directors, whose schedules and activities are frequently busy and almost always completely outside the control of the issuer, would be considerably more difficult to accomplish on a timely basis than gathering such information from executive employees who work for the issuer on a daily basis.

No. The only source of the required information is the more than ten percent beneficial owner itself, so if a filing is going to be required, it should be required of that party. Requiring a filing by the company merely makes them a middleman in the information flow, delaying its availability and increasing costs for the company for no reason.

Questions regarding implementation and costs:

No. In order to meet the two-day filing requirement, companies would have to be able to implement procedures to identify any reportable transactions before or immediately upon their occurrence. We believe it is unlikely, and unreasonable to expect, that issuers will be able to effectively implement procedures to timely satisfy these new filing deadlines, certainly with respect to the 2-day requirement, and in many cases even the transactions that are eligible for deferred reporting on the second business day of the following week. This is particularly true with respect to outside directors.

Not effectively, primarily for the reasons discussed above. Many of our clients send monthly reminders to directors and other Section 16 filers, in an effort to elicit information and help ensure timely Form 4 filings. Short of daily reminders (and immediate accurate responses thereto), no such reminder system could work to ensure timely Item 10 Form 8-K's, and yet it is the issuer itself that will bear the stigma and any other negative implications of late filings (notwithstanding the proposed finding that it is not in the public interest to impose any sanction on a diligent issuer), not the individual who is actually at fault.

According to cost estimates described in the proposal, companies should expect to file an average of 21 additional reports on Form 8-K each year at an average cost of $416.00 per filing in order to comply with the new requirements. However, that estimate does not appear to factor in the printer costs to convert the document into EDGAR format and file it electronically with the Commission. These printer costs could easily add another $250 per filing, bringing the total additional cost to approximately $14,000 annually. Furthermore, we believe that 21 estimated filings is conservative and suspect that many issuers, particularly those strapped for cash that compensate officers and directors with more equity, would easily exceed that number. These costs represent a significant burden for many companies, particularly smaller ones. Moreover, and perhaps just as important, these companies would be required to dedicate significant additional personnel resources, which are in many cases already stretched to the limit, to implement the procedures necessary to comply with the proposed rule. All of these costs would reduce earnings or increase losses, adding little or no value to the actual business operations of the companies. In that respect, the proposals are directly contrary to the interests of investors.

Questions regarding appropriateness of proposed reporting deadlines and dollar thresholds:

We think not. Regardless of the benefit to investors, requiring companies to make an 8-K filing within two business days is unreasonable and, in many cases, simply not feasible, as discussed above.

We actually suggest that the reverse should be considered-a time period after which smaller events need not be aggregated for Item 10 Form 8-K reporting purposes, if any. We respectfully submit that transactions should not be aggregated for this purpose, if in the intervening interval the information will already be required to be disclosed (in an insider's Form 4 filing, for example). For example, if an insider sells $6,000 worth of shares on June 1 and another $6,000 worth of shares on July 11, a company 8-K filing provides the market no additional information because the insider is required to file a Form 4 for the first sale on or before July 10.

Questions regarding proposed Commission finding:

While we applaud the Commission's consideration of the issue of company liability for violations beyond its control, we do not think the proposed finding does enough to address this concern. As noted above, the company will still bear the stigma of violations, even if no legal liability or consequences are imposed by the Commission. The limitation of the finding to "isolated" and not "repeated" violations lends uncertainty to the process, and means that companies are also still exposed for violations beyond their control.

Questions regarding "filed" status of reports:

No. These are unfair penalties to impose upon the company and holders of restricted or affiliate securities for failures that are not theirs, as discussed above.

No. The purpose is to make the information available to the public, so if the information has been previously reported there is no need for an additional filing. In fact, we respectfully submit that the instruction is not broad enough, in that it does not cover information previously reported by someone other than the company (i.e., the insider himself). As noted above with respect to aggregation of de minimis transactions, no company filing should be required if anyone (including the company and the insider) has previously publicly reported the information.

Questions regarding proposed exempt transactions:

Yes, at a minimum, gift transactions, natural expirations of derivative securities and grants made pursuant to automatic director grant programs should be exempt. Gift transactions do not sufficiently reflect any view as to the company's prospects to warrant accelerated disclosure. Reporting the expiration of a derivative security is duplicative, and likewise should be exempt. If an issuer has already reported the expiration date of a derivative security, it should not be required to file another report when the security expires on that date. Finally, automatic grants made to directors, where neither the company nor the director exercises any discretion with respect to timing, price or vesting, should be exempt. This is particularly true because the terms of these automatic director grants would have already been disclosed in prior filings.

Questions regarding relationship to Section 16(a) reports:

We believe the disclosures called for by the proposal are unnecessarily duplicative with disclosures required by other rules and creates an unwarranted burden on issuers. We respectfully urge the Commission not to unnecessarily add to the number of filings in its efforts to promote fuller and timelier disclosure to investors, but rather to calmly and deliberately develop a comprehensive approach that consolidates and simplifies the current and proposed disclosure system. For example, under the proposed rules, if an insider sells $100,000 of common stock, you are supposed to receive disclosure of that single transaction on each of the following forms:

1. a Form 144 on the day of sale;

2. a Form 8-K within two business days;

3. a Form 4 by the 10^th day of the following month; and

4. a prompt Schedule 13D or a Schedule 13G within 45 days after year-end.

We urge the Commission to consider consolidating two or more of these reporting obligations into one filing. Simply allowing issuers to attach a Form 4 to their 8-K filing (or insiders to do the reverse), as suggested in the release, does not lessen the burden or clutter of unnecessary and duplicative filings.

Derivative Securities

We think not. We doubt that the vast majority of ordinary course option grants made under a company's employee benefit plan has significant value to investors in making their investment decisions. Such grants provide very little, if any, information regarding management's view of company performance or prospects. Instead, such grants more typically represent the Board's efforts to remain competitive in recruiting and maintaining the best employees. For these reasons, the SEC decided some time ago that under Section 16 such option grants would be reportable on a deferred basis on Form 5. We see no reason to accelerate reporting of these transactions at this time.

Questions regarding disclosure of Rule 10b5-1 arrangements:

Quite possibly. Executives of some of our clients were very pleased at the adoption of the affirmative defense provision of Rule 10b5-1, at least in part because it allows them to diversify their personal portfolios on a more consistent and "dollar-cost-averaged" way, rather than being limited to selling during relatively short open trading windows that are subject to manipulation. Requiring too much detailed disclosure of the particular terms of Rule 10b5-1 arrangements could allow or encourage third parties to manipulate the market to thwart or otherwise take advantage of the insider's planned trades.

Thank you for considering our comments. If you have any questions or need additional information, please contact the undersigned or Kevin Prakke of this office at (919) 781-4000.

Sincerely,

Donald R. Reynolds