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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Yes buyers is acquiring 100% of Target valued at $67.2MM, even though it will hold only 88.8% of Newco.

Question

From:(redacted)

Sent:Thursday, July 06, 2006 8:25 PM

To:Verne, B. Michael

Subject:FW: HSR Question

Hello Mike. Could you giveme your thoughts about whether the below transaction would require a filing? Ifyou need more information, what are the questions need to be answered?

Asalways, thanks!

(redacted)

I am looking at a dealwhere a private equity client will create a new acquisition company (an LLC)("Newco") to purchase the assets of Target Company. The way thetransaction would be structured is that Target Company would contribute 11.2%of its assets to Newco in exchange for a corresponding 11.2% membershipinterest in Newco and then, at the closing, Newco would purchase the remainingassets. The overall value of Target is currently $67.2 Million which makes thevalue of the 11.2% rollover to be $7,526,400. The price will be adjusted up ordown by the amount by which closing date working capital exceeds or is lessthan a designated number (at least 3 months of working capital). $13.4 Millionof the $67.2 Value is intended to be in the form of an earn out that can bereached over a 3 year period based on hitting targer EBITDA numbers. Thebalance of the price will be paid in cash at closing. I would appreciate youradvice as to whether you think there will have to be a HRS filing.

2

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