1107010 Informal Interpretation

15 USC 18a(c)(10) - 7A(c)(10), 801.10
Michael Verne

- Agree.





Tuesday, July 05, 2011 11 :06 AM


Verne, B. Michael




Transaction Structure/Spin-Off and Debt Payments

Mike. We wanted toconfirm our HSR analysis of a proposed transaction with you. Buyer isinterested in purchasing all but one subsidiary ("Subsidiary") ofFund's controlled portfolio company ("Target").

Transaction Structure

The transaction will bestructured as follows:

Spin-Off. Immediately prior to the acquisitionof Target, Subsidiary will be spun-off from Target by distributing shares ofSubsidiary on a pro rata basis to existing shareholders of Target in the samepercentages of each shareholder's holdings in Target (Le., if a shareholdercurrently owns 25% of the shares of Target, it will hold 25% of the shares ofSubsidiary as a result of the spin-off). Per the Agreement providing for theacquisition of the Target and the Fund's obligations under the Agreement, thiswill occur prior to the acquisition of the Target

Acquisition of Target. The considerationfor the acquisition of Target will include the purchase price for the votingstock of Target, as well as, the assumption of certain liabilities, including pay-offof an existing loan from Fund to the Target, which was made around the timethat Fund acquired Target.

If the debt is excludedfrom the transaction value, then the value of the transaction is below $66M.

HSR Analysis

We believe that the spin-offis exempt under Section 7A(c)(10), as explained in Interpretation 19 from theABA Premerger Notification Practice Manual, as the percentage of shares ofSubsidiary received by each shareholder of Target is pro rata to its holdingsin Target.

We believe that in theacquisition of the target the debt payoff to the Fund may be excludedfrom the value. See, e.g., Interpretations 88 and 91 of the ABA PremergerNotification Practice Manual.

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