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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
This is a $50 million deal. The value of the non-corporate interests of LLC B includes the value of the underlying minority interest in LLC C (despite the fact that the parties are separately allocating $20 MM to that part of the transaction. This is akin to an acquisition of 100% of the voting securities of a corporation that holds minority interests in other corporations). Note, however, that the value of the interests in C would not count toward the limitation on non-exempt assets in an 802.4 analysis. The $10 million value of the LLC B options that are being cashed out would not be included in the value of the LLC B interests unless they are being exercised prior to closing. Presumably they do not give the holder any present right to profits of LLC B or assets upon its dissolution.

Question

From:(redacted)

Sent:Wednesday, May 16, 2007 10:38 AM

To:Verne, B. Michael

Subject:Another question

Hi,Mike -

Ihave what is probably a straightforward question. This is the scenario:

LLCA is paying $60 million cash ("Purchase Price") for 100% of themembership interests in LLC B (LLC A currently holds no interest in LLC B). LLCB holds a minority interest in LLC C; $20 million of the Purchase Price isbeing allocated to the LLC C interest and an additional $10 million of thePurchase Price is being allocated to LLC B options which are being cashed out.I understand that an acquisition of non-corporate interests is valued similarto an acquisition of non-publicly-traded securities so for purposes of 801.10(d), the value of non-corporate interests to be held as a result of thetransaction would seem to be $30 million? I am grappling with this because Icould also see the value as being $50 million (e.g., Purchase Price minus theoptions) or even $60 million.

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