Question
From: (redacted)
Sent: Wednesday, March 30, 2005 4:57 PM
To: Verne, B. Michael
Subject: convertiblenotes
Hi Mike,
May I runanother filing question by you? This question relates to the acquisition ofsenior secured convertible notes. We are trying to determine whether theacquisition would be considered the acquisition of a convertible votingsecurity that is exempt under Rule 802.31, or alternatively the acquisition ofa voting security with the present right to vote for directors that isreportable.
Our client ispurchasing senior secured convertible notes of Company A valued atapproximately $150m. As the deal is currently being discussed, in the notepurchase agreement, pursuant to which our client is purchasing the convertiblenotes, our client will receive the contractual right, pursuant to the notepurchase agreement, to appoint 2 out of 7 members of the board of directors ofCompany A. This contractual right to appoint directors is contained in the notepurchase agreement and not in the indenture which, for the most part, governsthe terms and conditions of the convertible notes.
I am strugglingto determine whether these convertible notes would be considered convertiblevoting securities as the convertible notes and related indenture don'tthemselves enable our client to vote for the directors of Company A. The rightsare granted in the separate note purchase agreement.
Do you believethat the acquisition of the convertible notes together with the rights grantedin the note purchase agreement would be considered a reportable transaction?Would your analysis differ if the rights granted in the note purchase agreementgranted only the right to nominate 2 out of 7 members of the board of directorsof Company A if there was also a voting agreement pursuant to whichshareholders of Company A agreed to vote their shares for the nominees proposedby our client?
We may need toprovide you with additional information but I wanted to get your impressionsbased on what we know from the corporate team at this time.