Question
From: (redacted)
Sent: Tuesday, June 01, 2004 7:30 PM
To: Verne,B. Michael
Subject: Confirmation ofInformal Advice
Dear Mike,
The purpose ofthis message is to confirm advice that you provided verbally regarding aproposed transaction. This advice was provided to us Monday, June 1, 2004 and was based on the following set offacts:
1) Company A hasentered into a distribution agreement with Company B that is exclusive with respectto certain defined services and territories. Pursuant to the distributionagreement, the parties entered into a royalty free, non-exclusive trademarklicense that allows Company B to use Company's A marks in conjunction with thedistribution arrangement between the companies. Company A is considering abuyout of Company B's distribution agreement, which will terminate thetrademark license.
2) Pursuant tothe distribution arrangements just described, Company B created a large number ofsub-dealers who currently have a large number of service agreements in placewith customers. When it terminates Company B's distribution rights, Company Aalso is acquiring many of those customer contracts from the sub-dealers. Someof those sub-dealers also will enter into distribution arrangements directlywith Company A on similar terms to the existing arrangement between A and B. Weare in the process of verifying that none of the customer contract acquisitionsfrom the sub-dealers meets the reporting threshold. However, Company A's terminationagreement with Company B states that B will convey or waive any rights it haswith respect to its sub-dealers' customer contracts. Company A believes thatthose rights, if they exist, are not of substantial value. In Company A's view,it is paying B for the termination of B's distribution rights and paying the sub-dealersfor the acquisition of their customer agreements. B's agreement to convey orwaive any rights relating to the sub-dealer customer contracts is to ensurethat there is no legal impediment to Company A's acquisition of those contractsfrom the sub-dealers.
In my telephoneconversation with you, I inquired as to whether the termination of theexclusive distribution agreement and the ancillary trademark license is areportable event. You indicated that it is not because it does not transferanything that is considered to be an asset for HSRpurposes.
In addition, Iasked whether the provision described in paragraph 2 regarding Company B'sconveyance or waiver of any rights it has with respect to its sub-dealers'customer contracts, implies that Company A is acquiring any potentiallyreportable asset from Company B. You stated that it does not, and that it isnot necessary for Company A do a fair market valuation of anything inconnection with its termination of Company B's rights.
I have writtenthis message to memorialize our conversation and request that you confirm theadvice you provided to us. Thank you for your time, consideration and guidancein this matter.