0602018 Informal Interpretation

Date

February 14, 2006

Rule

802.4

Staff

Michael Verne

Response/Comments

of-person test. 2) B is issuing all of its own voting securities to members of management of Target? Presumably, no one person is acquiring a reportable amount of B voting securities. 3) A's acquisition of convertible non-voting securities would be exempt under Section 802.31. We would not treat this as an acquisition of the underlying voting stock that A would hold upon conversion. Interp. 70 is talking about acquiring convertible voting securities and getting an irrevocable proxy to vote the underlying shares that A would hold upon conversion. That doesn't look like what's going on here. I'm reading it that A is getting non-voting convertible securities and a contractual right to designate 40% of the board.

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Question

From: (redacted)

Sent: Tuesday, February 14, 2006 3:19 PM

To: Verne, B. Michael

Subject:HSR Analysis

Mike,

I thought email may be themost effective way tc check our analysis of a HSR reportability question.

Cur client, A, has formed anew corporation, B, for the purposes of acquiring 100% of the voting securitiesof Target. B is its own UPE and has no revenues or assets other than cash fromA to be used to acquire Target's voting securities. B intends to acquire Targetand issue 100% of B's voting securities to Target's management. In the sametransaction, B will also issue A convertible voting securities and thecontractual right to appoint 40% of B's board of directors. Upon conversion, Awill have the right to appoint 100% of as board, but A has no present intentionto convert.

Our analysis is that:

1. B's acquisition of Targetis below the size-of-the-person test as B is its own UPE and has less than$11.3 million in assets.

2. A's acquisition of B'sconvertible securities should be treated as an acquisition of 40% of B's votingsecurities (the portion of convertible securities that would convert intoenough shares to appoint 40% of B's board per Int. 70).Since, 40% of the acquisition price is below the $56.7 million threshold nofiling is required until A converts.

Is this correct?

0602018 Informal Interpretation

Question

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