1210002 Informal Interpretation

Michael Verne

- Future commitments to contribute cash are only taken into account in
determining the size of person for the Newco. They would not be considered in
determining the size of transaction. K Walsh concurs.





Monday, October 01, 2012 3:16 PM


Verne, B. Michael


801.50 Question


Ihave a question about a 801.50 joint venture transaction. My client,Contributor A, plans to enter into Contribution Agreement with Contributor Band create Newco LLC. B will contribute non-exempt assets worth $134 million toNewco LLC and receive 50% of Newco LLC. A will contribute $67 million to NewcoLLC in exchange for 50% of Newco LLC. Under the Agreement, A & B will bothbe required to make cash calls in the future, which will be used to make capitalimprovements to the LLC assets. With respect to Contributor A, I understand the802.4 and 802.30(c) exemptions do not apply. In calculating the acquisitionprice in accordance with 801.10(d), does Contributor A need to take intoaccount the future cash calls it will make to Newco LLC? It would seem strangethat capital improvement funding would be taken into account.

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