Question
From:(redacted)
Sent:Friday, May 19, 2006 3:18 PM
To:Ferkingstad, James H.
Subject:HSR question: Manager deemed not to "control" limited liabilitycompany
VIAELECTRONIC MAIL
Mr. James Ferkingstad
PremergerNotification Office
Bureauof Competition -
FederalTrade Commission
600 Pennsylvania Ave., NW
Washington, D.C. 20580
DearMr. Ferkingstad:
Thismessage confirms our telephone conversation this afternoon (Friday, May 19, 2006)in which we discussed a proposed acquisition by my client, a newly-organized,for-profit Delaware limited liability company ("LLC"). Inparticular, I wish to confirm my understanding, based upon the facts describedbelow, that neither the natural person who is the "Manager" of theLLC nor any other person would be deemed to "control" the LLC withinthe meaning of 16 CFR 801.1(b)and, therefore, that the LLC would be its own "ultimate parent entity"for the purposes of the HSR Act.
The LLC is a newly-organizedlimited liability company that, as of the time of the acquisition, will nothave issued stock or any other securities other than units of (voting)membership interest. No person or entity will hold 50% or more of the units ofmembership interest (thus no person or entity will hold 50% or more of thevoting power represented by the units of membership interest), and no person orentity will have the right in the event of dissolution to 50% or more of theassets of the LLC.
TheLLC will not have any directors or trustees. However, pursuant to the LimitedLiability Company Operating Agreement of the LLC, the LLC will have one"Manager". The Limited Liability Company Operating Agreement providesthat the powers of the LLC shall be exercised by and under the authority of,and the business and affairs of the LLC shall be managed under the directionof, the Manager. Certain actions by the LLC, however, will require the approvalof both: (i) the Manager, and (ii) members holding at least 66 2/3% of theunits of membership interest.
The initial Manager will be a natural person who isnamed in the Limited Liability Company Operating Agreement. The initial Managerwill serve until he resigns or is removed by the affirmative vote of membersholding at least 75% of the units of membership interest.
Basedon the foregoing, it is my understanding that the staff of the PremergerNotification Office that neither the Manager nor any other person will be deemedto "control" the LLC within the meaning of 16 CFR 801.1(b).Assuming that this conclusion is correct, the LLC will not be controlled by anyother entity and, therefore, will be its own "ultimate parent entity"within the meaning of 16 CFR 801.1(a)(3).
Thank you very much for theassistance and guidance that you have provided in this matter. I would deeplyappreciate it if you would telephone me at (redacted) or contact me by email at(redacted) to confirm that this message and the conclusions set forth hereincorrectly stated your advice.