0807009 Informal Interpretation

From: (REDACTED)
Sent: Wednesday, July 16, 2008 11 :05 AM
To: Verne, B. Michael
Cc: (REDACTED)

Subject: size oftransaction question

Mike, I havechecked the informal opinions (some of which are linked below) but can't seemto find anything directly on point for the following scenario. Can you let meknow how the PNO would view #2 and #3 below purposes of determining the size ofthe transaction? You can assume the size of person test is met.

1) "A"would invest $40.5 million in existing retailer "B" in exchange for50% of the preferred stock of the company.

2)B's existing shareholders would also receive a $7.5 million seller note thatwould be (i) fully earned at closing, (ii) paid in three equal installmentsbeginning on the first anniversary of the closing, and (iii) accrue interest atthe rate of 8% per year.

3)Upon closing, A would call on lenders it has worked with in the past to securea $25 million senior term loan for B. Approximately $3 million would be used topayoff current debt, $3 million would go to bank fees/expenses/CM fee, and theremaining $19 million would be distributed to B's existing shareholders. Theshareholders would not be expected to repay this amount. The Company, B, wouldtake on the repayment obligation.

Should the $7.5million seller note and the $19 million distribution from the senior term loanbe considered in determining the size of the transaction for HSR purposes?

http://www.ftc.gov/bc/hsr/informal/opinions/0412002.htm
http://www.ftc.gov/bc/hsr/informal/opinions/0709001.htm
http://www.ftc.gov/bc/hsr/informal/opinions/0503018.htm

As always, thankyou in advance for your guidance.