8306005 Informal Interpretation

Dana Abrahamsen




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


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.




About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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