Question
January 25, 2006
VIA ELECTRONIC MAIL
Mr. Michael Verne
Federal Trade Commission
Premerger NotificationOffice
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mike:
Iam writing to confirm my understanding of our telephone conversation thisafternoon concerning the non-reportability under the Hart-Scott-RodinoAntitrust Improvements Act of 1976 (as amended, the "Act") and theapplicable regulations (the "Regulations") of a proposed transactiondiscussed below.
Proposed Transaction
Ourclient ("Partnership A") proposes to receive an equity investmentfrom an investment fund partnership ("Fund Partnership"). FundPartnership would make a capital contribution to Partnership A in an amount inexcess of $53.6 million and in return would receive limited partnershipinterests in Partnership A. At the time of the investment, the limitedpartnership interests in Partnership A held by Fund Partnership would entitleFund Partnership to greater than 50% of the profits of Partnership A. The termsof the partnership agreement of Partnership A would provide for various"payout levels" which, when and if achieved, would shift therespective sharing ratios of the various partners. Certain members ofmanagement of Partnership A would hold incentive partnership interests thatwould entitle those persons to certain percentages of Partnership A's profits.If and when the various payout levels are achieved, these incentive interestswould be entitled to an increasingly greater share of Partnership A's profits,with the end result being Fund Partnership would no longer be entitled to 50%or more of the profits of Partnership A.
Inaddition to the foregoing, Fund Partnership would acquire membership interestin the general partner of Partnership A ("GP LLC") which wouldentitle Fund Partnership to greater than 50% of the profits of GP LLC. GP LLCowns a 1% general partner interest in Partnership A.
Analysis
Onthe basis of the facts set forth above, the investment by Fund Partnership inPartnership A would be exempt from the filing requirements under the Actpursuant to the exemption concerning the acquisition of non-corporate interestsin financing transactions set forth in 16 C.F.R. 802.65.
Pleaselet me know as soon as possible if you disagree with the conclusion discussedabove or if I have misunderstood any aspect of your advice. My direct telephonenumber is (redacted).