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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Agree do not include $20MM in assumed debt. If there is an reasonable basis for estimating the adjustments, then the acquisition price is determined.

Question

From: (redacted)
Sent: Monday, October 18, 2004 10:11 AM

To: Verne, B. Michael

Subject: Issue concerning"acquisition price"

I would appreciate your thoughtson the following provision:

Aggregate Purchase Price. On theterms and subject to the conditions set forth in this Agreement, the Sellers agreeto sell to the Purchaser, and the Purchaser agrees to purchase from theSellers, the Shares owned by the Sellers, as set forth opposite the Sellers'respective names on Schedule 1, for an amount (the "Aggregate PurchasePrice") equal to the sum of (a) $110,000,000, plus (b) the aggregate Cashbalances of the Company and the Company Subsidiaries (if any) as of the ClosingTime, determined immediately prior to giving effect to the Closing (the"Closing Cash"), minus (c) the aggregate amount of all Indebtednessof the Company and the Company Subsidiaries (other than IntercompanyIndebtedness) that is funded and outstanding as of the Closing Time, determinedimmediately prior to giving effect to the Closing (the "ClosingIndebtedness"), minus (d) the amount of the Company Transaction Expenses,plus or minus (e) the amount of the Net Working Capital Adjustment.

Based on the seller's latestbalance sheet, the amount of "Indebtedness of the Company" exceeds$20 million. At closing, it is anticipated that that Indebtedness will exceed$20 million. Under informal interpretation 93 of the Premerger NotificationPractice Manual, I believe that the payment of the indebtedness by the buyer tothe debt holders is not counted toward the acquisition price. If I am correct,then the value of the transaction is approximately $90 million, subject toadjustments that will in any event not approach $100 million.

Am I correct in not counting the$20 million?

Is the acquisition price"determined" for HSR purposes, or is a FMV calculation required?

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