1111011 Informal Interpretation

802.3, 801.10
Michael Verne

– Refer to BOLD Italics for comments.


From: (Redacted)

Sent: Tuesday,November 29, 2011 1:58 PM

To: Verne,B. Michael

Subject: RE:Request for advice

Thank you for the promptreply. If you would indulge me, I would like to pose a follow up hypothetical:

1. A and B, who are neither affiliatesnor associates of each other, have negotiated a single purchase agreement("PSA") to buy 100% of the LLC interests in C.

2. C's assets consist of oil and gasreserves with a value of approximately $715 million and other assets with avalue of approximately $89 million, which consist primarily of associatedexploration and production assets. C has liabilities of approximately $260million.

oBased on these facts, the negotiated purchase price for 100% of the LLCinterests is $543.5 million.

3. Under the PSA, A will buy a 90% LLCinterest and B will buy a 10% LLC interest at a simultaneous closing governedby the PSA, for a total purchase price of $543.5 million, plus reimbursement ofC's transaction expenses of $5 million, for total consideration paid of $548.5million.

oThe total consideration will be split 90/10 between A and B, with Apaying $493.6 million and B paying $54.9 million.

4 Because B is purchasing a 10% LLCinterest that does not confer control of C, and B is neither an affiliate noran associate of A, I believe that B's acquisition is not reportable. (Agree)

5. Based on your email below, I analyzeA' s acquisition as follows:

oThe acquisition is reportable, because 90% of the value of the oil and gasreserves held by C (which will be held by A as a result of the acquisition) ismore than the $500 million exemption cap for carbon based reserves (715 x 90% =643). (Should use 100%)

oThe size of the transaction will be $493.6 million, which is A's purchase pricefor the 90% LLC interest it will acquire, and accordingly, the filing fee willbe $125,000. (Agree)

I would ask that youplease either confirm this analysis or agree to discuss it with me so that Imay give our client accurate advice in connection with the filing. The clientwill be requesting early termination of the waiting period, and so we want tobe sure that we are as accurate as possible in submitting the filing. Anyadvice you can give as to how to facilitate the review of the filing so as toachieve early termination would also be greatly appreciated.

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