Question
From:(redacted)
Sent: Thursday, June 03, 2004 6:41 PM
To:Verne, B. Michael
Cc:(redacted)
Subject:HSR Confirmation
Mike,
Set forth belowis the "corporate" structure we discussed this afternoon on thetelephone. I am writing this letter to confirm the applicability of variousexemptions from the reporting requirements of the Hart-Scott-Rodino AntitrustImprovements Act of 1976, as amended (the "Act") and the rules andregulations thereto (the "Rules").
The (redacted)is managed by the (redacted). (redacted) was incorporated as a Federal crowncorporation by an Act of Parliament. Pursuant to the Act of Parliament,(redacted) issued 10 shares of (redacted) to the Minister of Finance (the"Minister") and the Minister, in consultation with the participatingprovinces, is empowered to appoint all of the directors of (redacted). Based onthe foregoing and our discussions, I have determined the following:
1. (redacted) isthe Ultimate Parent Entity by virtue of the Act of Parliament. Despite the factthat the Minister has the power to appoint all of the directors of (redacted)the Minister is an agent of a foreign government which excludes it from thedefinition of "entity" under the Rules.
2. The exemptionunder Section 802.9 of the Rules may be applicable so long as voting securitiesare being acquired "solely for the purpose of investment" and, as aresult of the acquisition, the acquiring person would hold 10 percent or lessof the outstanding voting securities of the issuer. We understand that the term"solely for the purpose of investment " is narrowly interpreted andthat the acquiring person can have "no intention of participating in theformulation, determination or direction of the basic business decisions of theissuer".
3. The exemptionunder Section 802.64 of the Rules may be applicable to acquisitions of votingsecurities meeting the four prong test set forth in Section 802.64(b), exceptfor acquisitions described in Section (c) of 802.64. The first prong issatisfied as the (redacted) is considered an institutional investor underSection 802.64(a)(10) of the Rules.
4. The exemptionunder Section 802.52 would be applicable as (redacted) is controlled by theMinister (i.e., the Minister appoints the directors of (redacted)), an agent ofa foreign government. The exemption applies to acquisition of assets locatedwithin Canada or voting securities of an issuerorganized under the laws of Canada. Furthermore, under this exemption, thereis no nexus relationship between the assets/voting securities being acquiredand the aggregate sales in or into the USattributable thereto. For greater clarity, the following transactions would beexempt under 802.52.
a. The(redacted) acquires 75% of the voting securities of Corporation X, acorporation formed under the laws of Canada, for US$300 million. Corporation Xhas 5 US subsidiaries with assets (located in the US) valued at US$200 million.The US subsidiaries generate sales in the US of US$500 million.
Please confirmyour agreement with each of the points raised above. If you have any questionsplease don't hesitate to contact me.