March 25, 1983
Dana Abrahamson, Esquire
Federal Trade Commission
Washington, D.C. 20580
Dear Mr. Abrahamson:
Confirming our telephone conversation of the last two weeks, the
following planned transaction is not reportable under the Hart-Scott-
(Redacted ) is a wholly-owned subsidiary
of the ( redacted ), an ultimate parent entity with sale and
assets substantially in excess of $100 million. (Redacted) proposes to
sell certain outlets to a newly-formed Delaware corporation, (redacted)
( redacted ) in a transaction which will substantially
exceed $25 million (aggregating payments made and assumed liabilities).
Ownership of (redacted) will be as follows upon closing of the transaction.
(Redacted), a natural person, will own 48% of the voting stock. A
voting trust for stock owned by (redacted), another natural person, will
hold 12% of the voting stock. (Redacted) will have the contractual
right to vote all stock held by this voting trust. He will thus own
or control 60% of the voting stock. The remaining 40% of the voting
stock will be owned by (redacted). (Redacted) will own all of the preferred
stock of (redacted). Upon the happening of certain events of default, (redacted)
may be entitled to utilize rights stemming from this preferred stock
to elect a majority of the board of directors of (redacted). (Redacted) would continue
to have this right only until the default or defaults were cured.
Under these facts, (redacted) and only (redacted) is deemed the
ultimate Parent of (redacted). Though (redacted) may have the contractual right
to elect a majority of the board of directors upon the happening of
certain contingencies, it has no present right to do so. Neither
(redacted) nor (redacted) holds business assets of $10 million or more. The
proposed sale of assets by (redacted) to (redacted) is not reportable because
(redacted), (redacted) ultimate parent, is not a $10 million Person. This is
so even though (redacted) expects to have unused line of credit exceeding
$10 million after acquiring the assets from (redacted). The line of credit
test for determining a persons size is an informal test which is used
by the Federal Trade Commission only when an newly-formed acquiring
corporation is its own ultimate parent.
Moreover, the formation of (redacted) is not reportable. Though (redacted)
is deemed to be $100 million Person, neither of the other contributors
to formation of (redacted) (redacted) and (redacted) is a $10 million Person.
(Redacted) proposed lenders (which are $10 million Persons) will not receive
any stock of (redacted), and thus are not seen to be contributing to its for-
mation within the meaning of the Hart-Scott-Rodino Act.