Question
From: (redacted)
Sent: Tuesday, April 05, 2005 4:28 PM
To: Verne, B. Michael
Cc: : (redacted)
Subject: HSR- Hypothetical Questions
Mike,
I have included below some broadly worded hypothetical situations for which I wouldlike to discuss the potential HSR applicability. As we discussed,(redacted) and I will call you tomorrow at 1:00 pmto discuss these questions and certain more specific follow-up questions. Thankyou, in advance, for your time in reviewing these questions and agreeing tospeak with us tomorrow.
1. If a Company acquires the only income generating asset of a non-corporateentity (i.e., a completed film or television project, herein "Film"),but it does not acquire the shares of the non-corporate entity itself, does HSR apply?
2. If a Company acquires a completed Film from a foreign non-corporate entity,where is the Film "located" for purposes of the HSR foreign exemption? Is the location of the master negativecritical?
3. How do you measure the Film's value? Should the value of the Film bemeasured according to the governing agreement so that if the agreement says theprice will be the Film's production cost, that is the value even if the Filmlater proves to be a popular success capable of generating revenues farexceeding production cost?
4. If a Company wants to take a security interest in the Film copyright, thephysical materials as they come into existence, the production bank account(all of which is commonly included in the definition of "collateral"),and the shares of the foreign entity producing the Film, is the mere taking ofthe security interest in the foreign entity an HSRtrigger event? If not, what is the result if the Company elects to foreclose onits security interest including full ownership of the foreign entity?
5. If a Company loans a foreign entity 100% of the funds needed to produce theFilm (which will be the sole income-producing asset of the entity), is thatloan considered an ownership interest? It is probably safe to assume theCompany will always seek to create a security interest which allows the Companyto foreclose on the Film in full (often the only income generating asset) inthe event of a defined set of trigger events (including dissolution of theentity itself).
6. If the Company makes a loan of more than 50% of the Film's productionbudget, but less than 100% of the budget, if the Film is the onlyincome-generating asset belonging to the entity, is the Company the owner tothe extent of its loan?
7. If the Company is asked to accept transfer of ownership of the foreignentity (for example, a partnership), instead of receiving a transfer of theFilm being produced by the entity, does that transfer of the foreign entitytrigger an HSR filing?