Question
From:(redacted)
Sent:Wednesday, March 29, 2006 1:44 PM
To:Ovuka, Nancy M.
Cc:(redacted)
Subject:Confirmation of HSR Advice
(redacted)
March 29, 2006
Ms. Nancy Ovuka
Compliance Specialist
Premerger NotificationOffice
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re:Applicability of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, asamended, 15 U.S.C. 18a(the "Act") Dear Nancy:
Thankyou for taking the time to speak with me on Friday, March 17, 2006. I amwriting to confirm the advice you provided. The factual background that Iprovided you is set forth below:
Background:
Company A is a $113.4million person and intends to acquire by way of a reverse triangular merger(the "Merger") all of the outstanding voting securities of Company B,which is not engaged in manufacturing. Company B is an $11.3 million person.Company B currently has outstanding shares of common stock and preferred stock,each class of which constitutes voting securities under the Act. Based on theper share value that Company A is to pay for Company B's currently outstandingvoting securities, the aggregate value of the currently outstanding votingsecurities to be acquired by Company A is less than $56.7 million.
In addition to itsoutstanding voting securities, Company B has outstanding options, warrants andconvertible notes, none of which currently carry with them the right to votefor the election of directors of any entity and would thus constituteconvertible voting securities under the Act. The holders of the convertiblevoting securities will receive in connection with the Merger the inherent valueof such securities, however, such convertible voting securities will not beexercised/converted in connection with the Merger and such holders will nothold voting securities at the time of the Merger, rather, such holders will simplyreceive the inherent value of their convertible voting securities and suchsecurities will be canceled in connection with the Merger. The consideration tobe paid by Company A in respect of Company B's convertible voting securities issuch that if aggregated with the consideration to be paid for Company B'soutstanding voting securities would exceed $56.7 million.
Issue:
Youwere kind enough to answer the following question concerning the above statementof facts. I have summarized the question and your answer below:
Question:Should the value that is ascribed to the convertible voting securities (i.e.The options, warrants and convertible notes), which value will be paid byCompany A in connection with the Merger, be included in the aggregate totalamount of the voting securities that Company A will acquire in connection withthe Merger?
You confirmed that under theAct only the value of the outstanding voting securities that are to be acquiredis considered in determining whether the acquiring person will acquire $56.7million of voting securities of the acquired person. The consideration to bepaid to the holders of convertible voting securities in respect of the inherentvalue of such securities need not be included in the value of the acquiredvoting securities.
Ihope that this note accurately summarizes the advice that we discussed. If I amincorrect in my summary of our conversation, please let me know at yourearliest convenience.
Thankyou for your time and assistance.