1103003 Informal Interpretation

Michael Verne

– Agree.





Thursday, March 03, 2011 3:06 PM


Verne, B. Michael

Subject: HSRTreatment of LLC Formation Transaction

Dear Mike,

I'm writing to confirm my understanding of the Hart-Scott-Rodino("HSR") analysis we discussed during our teleconference earlier thisafternoon.

As I explained during our conversation, the proposed transaction involves theformation of a new joint venture structured as a limited liability)' company."Company A" and "Company B" have executed a Letter ofIntent pursuant to which each party will contribute certain assets to a newlyformed LLC, while an additional cash purchase will be used to re-balance eachparty's interest in the LLC such that Company A will own 40% and Company B 60%of the newly formed entity.

More specifically, Company A will create a newly-formed LLC specifically forpurposes of this transaction. Upon closing of the proposed transaction, CompanyA will contribute certain of its businesses to the LLC in exchange for equity.Until such time, the LLC will have no assets. Company B will also contributecertain of its businesses to the LLC in exchange for equity. Immeo"~8telyprior to B's contribution, Company B will pay Company A cash consideration inexchange for equity interests, su'.ch that in the end Company A will own 40%and Company B 60% of the newly created LLC. (By way of background, based on therelative value of the parties' contributions, Company B would only be entitledto approximately 30% of the total equity interest in the LLC)

While the LOI prescribes these various steps, the subsequent transactiondocuments will further prescribe that they take place in the order describedabove and that once Company A has attributed the relevant assets to LLC, allother steps will be unconditional (i.e., will be required under the transactiondocuments). While these steps could be an instant apart, we understand that inorder to obtain the desired tax treatment, the steps will be staged in theorder described above, with Company A's and Company B's asset contributionsbeing not more than one day apart.

Based on these facts, you agreed that this transaction is properly viewed asthe formation of an unincorporated entity under 16 CFR 801.50. Under thatprovision, Company B would be deemed an "acquiring person" for HSRpurposes by virtue of its acquisition of 50% or more of the equity of the LLC(as in this case, profits will be allocated among the parties based on theirrespective equity holdings). Assuming that the rest of the applicablethresholds are satisfied, and no exemption applies, Company B would be requiredto file an HSR notification. However, neither Company A nor the LLC would bedeemed to be an acquired person and neither would have a filing obligation.

If you have any questions regarding this matter or if this correspondence doesnot accurately reflect our discussion, please let me know at your earliestconvenience. As always, thank you very much for your time and consideration ofthis matter.

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