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U.S. Securities and Exchange Commission

Securities Act of 1933
Section 2(a)(1)

June 29, 2006

Response of the Office of Chief Counsel
Division of Corporation Finance


Handy Hardware Wholesale, Inc.
Incoming letter dated June 28, 2006

Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion that the registration under the Securities Act of 1933 and the Securities Exchange Act of 1934 is not required, Handy Hardware: (i) converts all issued and outstanding Preferred Stock into Class B Common Stock without registration under the Securities Act; (ii) offers, sells and issues shares of its Class A Common Stock, Class B Common Stock, new Class C Common Stock and notes to Members based solely upon their patronage of Handy Hardware without registration under the Securities Act; and (iii) discontinues filing periodic and other reports under the Exchange Act once the Company has filed a Form 15 to terminate registration under Section 12 of the Exchange Act of its Class A Common Stock, Class B Common Stock and Preferred Stock, and to suspend its reporting obligation under Section 15(d) of the Exchange Act. Capitalized terms have the same meanings defined in your letter. This position is conditioned on the consummation of the reincorporation and recapitalization described in your letter.

In reaching this position we note in particular that:

  • the common stock will not be offered or sold and the notes will not be issued to any parties other than the retail hardware dealers that are Members;
  • the common stock will not possess most characteristics of a security, such as ordinary dividend rights or unrestricted transferability;
  • there will be no potential for appreciation in the common stock's value;
  • each stockholder will have equal voting power on matters presented to the stockholders for their approval, irrespective of the number of shares owned by each such stockholder;
  • the common stock will represent only membership interests in a corporation operated on a cooperative basis; and
  • the notes will not be transferable or negotiable, will not bear interest, and will represent indebtedness entered into on the same terms as any other commercial loan.

This position is based on the representations made to the Division in your letter. Any different facts or conditions might require the Division to reach a different conclusion. Further, this response expresses the Division's position only on enforcement action and does not purport to express any legal conclusions on the questions presented.


Eric Finseth

Incoming Letter:

The Incoming Letter is in Acrobat format.


Modified: 07/06/2006