| [LETTERHEAD OF SONNENSCHEIN NATH & ROSENTHAL LLP] |
1301
K Street, N.W.
Suite
600, East Tower
Washington,
D.C. 20005-3364
202.408.6400
202.408.6399
fax
www.sonnenschein.com
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Melissa
Campbell Duru, Special Counsel
Office
of Mergers and Acquisitions
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100
F Street, NE
Washington,
DC 20549 - 3628
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Re:
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CNS
Response, Inc./Leonard J. Brandt
Commission
File No. 0-26285
Comment
Letter Dated September 16, 2009
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1.
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As
discussed with the staff and as indicated in your materials, it appears
that the company will no longer be soliciting for proxies related to the
September 4, 2009 meeting or any adjournment thereof. Please confirm this
fact supplementally in your response letter.
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Company
response:
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The
Company supplementally confirms that it will no longer be soliciting
proxies related to the purported September 4, 2009 meeting or any
adjournment thereof.
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2.
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Throughout
your soliciting materials, please avoid presenting as fact legal
conclusions that the company has made in advance of findings by any state
or federal court. For example, you state that the September 4, 2009
meeting had deficiencies and was “not a legitimate meeting”. In future
filings, wherever such statements are made, please also disclose that
matters regarding the legitimacy of Mr. Brandt's actions are in dispute
before the courts and may ultimately not be decided in favor of the
company.
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Company
response:
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The
Company will avoid presenting as fact legal conclusions that it has made
in advance of findings by a court. In this regard, the Company
believes that its disclosures in the proxy statement, the materials it has
filed under Rule 14a-12 and in its Form 8-K filings, taken as a whole,
make it clear that there are disputes regarding these matters that are
currently the subject of Delaware and federal court actions, the courts in
those actions have yet to make render any final decisions and the courts
may render decisions that are adverse to the Company. The
Company’s disclosure in future filings will address, where appropriate,
the disputed nature of the legitimacy of Mr. Brandt’s
actions.
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3.
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Please
avoid statements that directly or indirectly impugn character, integrity
or personal reputation or make charges of illegal or immoral conduct
without factual foundation. Refer to Rule 14a-9. Please revise to delete
assertions in the document regarding Mr. Brandt's “misleading statements”
and “false claims”.
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Company
response:
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The
Company understands the limitations set forth in Rule 14a-9 regarding
statements that directly or indirectly impugn character, integrity or
personal reputation or make charges of illegal or immoral conduct without
factual foundation. With respect to the Company’s statements
regarding Mr. Brandt’s “misleading statements” and “false claims,” the
Company believes it has adequate factual foundation for its
assertions.
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4.
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Throughout
your disclosure, you assert what appear to be legal conclusions regarding
whether or not Mr. Brandt's actions were valid and the proper
interpretation of the version of the bylaws of the company. As
noted in a previous comment, wherever such statements are included, please
also provide balanced disclosure acknowledging that matters regarding the
legitimacy of Mr. Brandt's actions and interpretations of applicable
company charter provisions and state law are matters that are pending
before the courts and may ultimately not be decided in favor of the
company.
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Company
response:
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As
noted in the Company’s response to comment 2 above, the Company’s
disclosure in future filings will address, where appropriate, the disputed
nature of the legitimacy of Mr. Brandt’s actions. The Company believes
that the discussion included under the caption “Other Matters” adequately
informs stockholders of the nature of the litigation relating to Mr.
Brandt’s actions and that these matters are currently pending before the
Delaware and federal courts. The Company also believes that its
disclosure makes it clear that these matters may not be decided in the
Company’s favor. For example, with respect to the “status quo”
motion, the Company states “[i]f the Court enters a form of status quo
order that would operate to prevent us from having our September 29 annual
meeting, we will comply with that order and postpone or adjourn the annual
meeting to a later date (unless such order prevents us from doing
so).” Similarly, with respect to the Section 225 action, the Company
indicates “…it is possible that Mr. Brandt could be provided relief that
is not consistent with the vote of the stockholders at the September 29
meeting, including the possibility that our nominees will not be deemed to
have been elected as directors even if they otherwise would have received
the votes of a majority of the CNS stock voting at the
meeting.”
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5.
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Please
revise the letter to shareholders to prominently highlight the fact that
Mr. Brandt has raised legal challenges under state law that seek to
validate his September 4, 2009 meeting. Your letter should similarly
highlight that such challenges could prevent the September 29, 2009
meeting from taking place or negate the validity of any proxies returned
in connection with the September 29, 2009 meeting.
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Company
response:
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The
Company believes that the disclosures included elsewhere in its definitive
proxy statement concerning the purported September 4 meeting and Mr.
Brandt’s Delaware court action to attempt to validate that meeting and its
results adequately inform stockholders of the matters addressed in your
comment, and, therefore, no additional disclosure in the cover letter is
necessary.
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6.
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You
indicate your intention to oppose any attempt by Mr. Brandt to cause the
removal of your current directors through action by written consent.
Please clarify that the return of the white proxy card would only be valid
with respect to the September 29, 2009 meeting or an adjournment thereof
and would have no bearing on any consent solicitation. Further confirm
supplementally in your response that any solicitations by the company
seeking the revocation of consents will be filed under separate cover of
Schedule 14A.
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that the white proxy card is valid only with
respect to the annual meeting of stockholders scheduled for September 29,
2009 and any adjournment or postponement thereof and will not be valid in
connection with any opposition to Mr. Brandt’s consent
solicitation. The Company also supplementally confirms that any
solicitation by the Company seeking the revocation of consents that may
have been provided by stockholders to Mr. Brandt will be made pursuant to
a separate Schedule 14A filing.
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7.
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In
your disclosure, you state that Mr. Brandt “after 12 months [was]
unsuccessful in his efforts to secure acceptable financing.” Your
disclosure suggests that Mr. Brandt was single-handedly responsible for
securing financing, Please revise to clarify and acknowledge, if true,
whether Mr. Brandt was solely responsible or whether other members of the
Board and/or management were charged with searching for
financing.
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that Mr. Brandt was primarily responsible for
identifying potential investors and securing
financing.
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8.
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You
highlight the failure of Mr. Brandt, as Chairman of the Board, to call a
shareholder meeting during his tenure as Chairman. Please revise your
disclosure to describe, in a more balanced manner, the provisions in the
company's bylaws that similarly would have permitted the Board of
Directors to call a shareholder meeting and explain why no such meeting
was called.
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
regarding the bylaw provisions with respect to the calling of meetings and
an explanation as to why no such meeting was
called.
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9.
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Support
for each statement or assertion of opinion or belief must be self-evident,
disclosed in the proxy materials, or provided to the staff on a
supplemental basis, For example, please provide support for the following
statements:
·“these
nominees will provide the type of leadership that will help CNS move
forward as we enter a critical phase in CNS's growth and
development...”;
·“Mr. Carpenter
was better qualified to lead ...efforts to secure additional financing to
complete the clinical trial..”; and,
·“...those
efforts...have caused us to incur significant legal and related
expenses...”.
Where
the basis of support is other documents, provide either complete copies of
the documents or sufficient pages of information so that we can assess the
context of the information upon which you rely. Mark any
supporting documents provided to identify the specific information relied
upon, such as quoted statements, financial statement line items, press
releases, and mathematical computations, and identify the sources of all
data utilized.
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Company
response:
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With
respect to the first statement (“these nominees will provide the type of
leadership…”), the Company believes that the background and experience of
each of the nominees, as discussed in detail in the biographical
information for each nominee included elsewhere in the proxy statement,
supports the statement.
With
respect to the second statement (“Mr. Carpenter was better qualified to
lead ...”), the Company believes that this is self-evident, as the board
of directors, in the exercise of its business judgment, determined to
replace Mr. Brandt with Mr. Carpenter. The Company also
believes that the statement is further supported by (i) the fact that it
has successfully raised over $2 million since Mr. Carpenter became the
CEO, whereas the only recent financing the Company obtained during Mr.
Brandt’s tenure consisted of two bridge loans, one of which was provided
by Mr. Brandt himself and the other by a venture capital firm affiliated
with one of the Company’s directors and (ii) Mr. Carpenter’s success in
adding Messrs. Thompson and Pappajohn to the board of
directors.
With
respect to the third statement (“...those efforts...have caused us to
incur significant legal and related expenses...”), this is a factual
statement, not one of opinion or belief. The Company has, in
fact, incurred significant legal and other fees and expenses that are
directly related to Mr. Brandt’s actions, which it would not have incurred
otherwise.
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10.
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Refer
to Item 4(b)(3) of Schedule 14A. Please clarify all the means you intend
to use in the solicitation of proxies. Currently, your disclosure suggests
that you will only solicit proxies personally, telephonically, via mail or
facsimile. You omit reference of the use of the Internet. Please revise.
Additionally, please note that all written soliciting materials, including
any e-mails or scripts to be used in soliciting proxies must be filed
under the cover of Schedule 14A on the date of first use. Refer to Rule
14a-6(b) and (c). Please confirm your understanding.
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that the Company intends to also use the Internet
to solicit proxies. The Company also supplementally confirms
its understanding that all written solicitation materials, including
emails and scripts used for soliciting purposes, must be filed under cover
of Schedule 14A on the date of first
use.
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11.
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You
indicate that you may engage a firm to assist in the solicitation of
proxies. If a firm is engaged, please confirm in your response letter that
you will provide in revised materials, the information required by Item
4(b)(3) of Schedule 14A.
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Company
response:
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The
Company supplementally confirms that it will provide the disclosure
required by Item 4(b)(3) of Schedule 14A in the event the Company engages
a firm to assist in the solicitation of
proxies.
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12.
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It
would appear that you intend to solicit proxies via the Internet. Please
tell us whether you also plan to solicit via Internet chat rooms, and if
so, tell us which websites you plan to utilize. Please note our comment
above regarding materials that must be filed under cover of Schedule
14A.
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Company
response:
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The
Company supplementally confirms that it does not intend to solicit proxies
via Internet chat rooms.
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13.
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Please
revise to disclose whether each of the nominees consented to be named in
the proxy and to serve, if elected. See Rule 14a-4(d).
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
that each of the nominees named in the proxy statement has consented to be
named therein and to serve if
elected.
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14.
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Please
revise the biographical information of the nominees so that it complies
with Item 401 of Regulation S-K. Refer to Item 7(b) of Schedule 14A. For
example, revise the biographies to ensure that you completely describe
each individual’s business experience for the past five years and disclose
the dates of experience by month and year. Also, please ensure that there
are no gaps or ambiguities regarding time in the five-year business
sketches you provide.
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Company
response:
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The
Company’s additional definitive soliciting materials include revised
biographical disclosure for the directors/nominees and executive
officers.
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15.
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Please
update the information required by Item 5(b)(iv) of Schedule 14A regarding
the amount of equity securities beneficially owned by the participants as
of the most recent practicable date prior to the filing of the definitive
proxy statement.
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Company
response:
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The
information regarding the beneficial ownership has not changed since the
date indicated in the proxy
statement.
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16.
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You
include a “blanket item” in the form of proxy in which you indicate that
the proxies are authorized to vote in their discretion on such “other
business that may properly come before the meeting and any adjournments or
postponement hereof…” However, since you must specifically describe how
the proxy will be voted and provide all of the information required by
Schedule 14A (other than those matters for which Rule 14a-4(c) confers
discretionary authority to act), this may be inappropriate. See Rule
14a-4(a)(3). While you may seek explicit authority to vote to adjourn the
meeting to solicit additional proxies, it appears the authority you seek
is broader. Alternatively, revise to clarify that you will only vote in
your discretion on such matters which you are unaware of a reasonable time
before the meeting. Please revise or advise.
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Company
response:
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that the proxy holders intend to use their
discretionary authority only as to such matters which they are unaware of
a reasonable time before the meeting and that the Company currently knows
of no other matters to be presented for action at the
meeting.
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In connection with responding to
your comments, the participants acknowledge that:
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the
participants are responsible for the adequacy and accuracy of the
disclosure in the filing;
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staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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the
participants may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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Sincerely,
/s/
Thomas L. Hanley
Thomas
L. Hanley
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