Question
(redacted)
June 28, 1983
Dana Abrahamson, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Washington, D.C. 20580
Dear Mr. Abrahamson:
This is to confirm our telephone conversation of
yesterday afternoon in which we discussed the applicability
if the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the Act or H-S-R) and the regu-
lations thereunder (the Rules) to the following proposed
transactions:
In connection with the sale of a business, our
client (Seller) us entering into an agreement granting a right
of first refusal (the Agreement) to acquire certain natural
resource properties (the Land) to the purchaser of the business
(Buyer). Under the Agreement, should Seller receive an offer
tp purchase the Land which is acceptable to it, it must give
notice to Buyer, after which Buyer has a set period of time
within which to exercise it right under the agreement to buy
the Land on the same terms as the offer. Upon the exercise of
its right of first refusal, Buyer will enter into a management
agreement and will receive an unconditional call on the Land,
Seller will receive a put for the Land to Buyer, exercisable only
afer four years.
Pursuant to the management agreement, Buyer will
operate the Land for its own account, with full rights to deplete
the natural resources. The call, which may be exercised by
Buyer at any time, and the put, which may be exercised by Seller
after four years, are both unconditional and provide for payment
of the full purchase price established at the time of exercise
of the right of first refusal by buyer increased by 10.5% per
year compounded from the date of exercise.
I explained to you that we had conclude that bene-
ficial ownership passed from Buyer to Seller at the time the
management agreement was implemented because Buyer would have
the right to any profits and liability for any losses from
operating the Land; Buyer would have an insurable interest in the
Land; through its call buyer would have the right to get title
and thus to transfer its interest in the Land; and because Sellers
put to Buyer after four years is unconditional, Buyer would have
the risk of loss. You indicated that determination of when
beneficial ownership changes hands is generally to be by the
parties but that you agreed that beneficial ownership should be
deemed to pay w hen the management agreement was implemented rather
than when title passed at some time in the future. On that basis,
you informed me that the filing and waiting period requirements
of the Act should be observed at the time the right under the
Agreement was exercised and that no filing or other obligations
under the Act and the Rules would arise at the time the put or call
is exercises and title passes.
Although I understand that it is not the usual policy
of the Premerger Notification Office, I would appreciate written
confirmation from you of this informal interpretation because any
question as to the lack of necessity for filing when title
and payment are exchanged may not arise for several years. Should
you determine that it is not possible for you to provide written
confirmation, I will conclude that you find this letter to
accurately reflect the substance of your informal advice unless
I hear fro you to the contrary.
Sincerely,
(Redacted)