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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Neither reduction would be appropriate. Shareholder 1, through its control of B, holds assets valued at $53MM as a result of the acquisition. Shareholders 2s acquisition of voting securities of B is a separate transaction. N. Ovuka concurs.

Question

From: (redacted)
Sent: Wednesday, December 08, 2004 11:31 AM
To: Verne, B. Michael
Cc: (redacted)

Subject: hypothetical question

Company A isselling assets to Company B.

Company A isowned 70% by Shareholder #1 and 30% by Shareholder #2

Company B isowned 70% by new shareholder and 30% by shareholder #2. Company B is formed toacquire the assets of Company A.

The assets of Aare sold to B for 40 million cash plus 13 million of assumed liabilities.

Of the proceedsof the sale to A, shareholder #2 will receive 12 million and reinvest 6 millionin company B for the 30% share.

QUESTION: canthe acquisition price be reduced by either the 30% shareholder #2 held in bothA and B in common?

Can theacquisition price be reduced by the 6 million cash reinvested in B byshareholder #2?

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