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Date
Rule
802.4
Staff
Michael Verne
Response/Comments
of-person test. 2) B is issuing all of its own voting securities to members of management of Target? Presumably, no one person is acquiring a reportable amount of B voting securities. 3) A's acquisition of convertible non-voting securities would be exempt under Section 802.31. We would not treat this as an acquisition of the underlying voting stock that A would hold upon conversion. Interp. 70 is talking about acquiring convertible voting securities and getting an irrevocable proxy to vote the underlying shares that A would hold upon conversion. That doesn't look like what's going on here. I'm reading it that A is getting non-voting convertible securities and a contractual right to designate 40% of the board.

Question

From: (redacted)

Sent: Tuesday, February 14, 2006 3:19 PM

To: Verne, B. Michael

Subject:HSR Analysis

Mike,

I thought email may be themost effective way tc check our analysis of a HSR reportability question.

Cur client, A, has formed anew corporation, B, for the purposes of acquiring 100% of the voting securitiesof Target. B is its own UPE and has no revenues or assets other than cash fromA to be used to acquire Target's voting securities. B intends to acquire Targetand issue 100% of B's voting securities to Target's management. In the sametransaction, B will also issue A convertible voting securities and thecontractual right to appoint 40% of B's board of directors. Upon conversion, Awill have the right to appoint 100% of as board, but A has no present intentionto convert.

Our analysis is that:

1. B's acquisition of Targetis below the size-of-the-person test as B is its own UPE and has less than$11.3 million in assets.

2. A's acquisition of B'sconvertible securities should be treated as an acquisition of 40% of B's votingsecurities (the portion of convertible securities that would convert intoenough shares to appoint 40% of B's board per Int. 70).Since, 40% of the acquisition price is below the $56.7 million threshold nofiling is required until A converts.

Is this correct?

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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