1104002 Informal Interpretation

Michael Verne

Agree – not reportable.


Sent: Monday. April 11, 201111:57 AM
To: Verne, B.Michael
Subject: Series of Transactions Importance: High

Mr. Verne: I left you a voice mail this morningand would appreciate your assistance in determining if the following series oftransactions result in any of the parties being obliged to file aHart-Scott-Rodino Report form.

1. Individual A owns all the shares of Target, andIndividual A owns personal assets that are used in the business of Target. A'spersonal assets are what give the Target business value.

2. Party B forms a limited liability company called"Holdco" and contributes $34 million to it.

3. Individual A contributes his personal assets (used inthe business of Target) to Holdco for $12.5 million consisting of (i) $5million cash (paid from Party B's $34 million investment) and (ii) 18% interestin Holdco, which is valued at approximately $7.5 million.

4. Individual A also contributes all of his shares ofTarget to Holdco, the value of which is de minimis.

5. Holdco contributes $25 million (from Party B's $34million investment) to Target, which is now Holdco's wholly-owned subsidiary.

6. Target borrows $22 million from bank. The loan isguaranteed by Holdco.

7. Target uses the $25 million contribution from Holdco,and the $22 million loan from the bank, which is guaranteed by Holdco, topayoff existing debt of $47 million owed by Target to a different bank.

Individual A has more than $13.2 milliontotal assets and that Party 6 has more than $131.9 million total assets.

A. I am assuming thatthe formation of Holdco, even if it is deemed to be a joint venture ofIndividual A and Party B, is not reportable because the only non-cash assetscontributed to its formation are Individual A's personal assets and his sharesof Target, which together equal approximately $12.5 million. Do you agree?

B. Do the formation ofHoldco ($34 million) and Holdco's acquisition of Target ($7.5 million) andIndividual A's assets ($5 million), and Holdco's guaranty of Target's loan ($22million) somehow combine to be a reportable transaction? I don't see it.

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