Question
From: (redacted)
Sent: Tuesday, January 15, 2008 3:46 PM
To: Verne, B. Michael
Cc: (redacted)
Subject: Confirmation of Understandingon Reportability of Transactions
DearMr. Verne:
Thank you for taking the time to speak with (redacted)and me this morning. January 15, 2008,about the reportability of certain transactions involving my client, Company A(as described below) and its sole shareholder, Mr. A, and Mr. (redacted)client, VC (as described below). This email serves to further elaborate on andconfirm our conversation this morning during which we agreed that, under thefactual scenario described below, no HSR filings are necessary for thetransactions described below.
As discussed, (i) all transactions described herein willoccur simultaneously and are subject toand conditioned upon the occurrence of all other transactions, and (ii) the finalresult of the transactions will be the acquisition of two operating companies(Company A and Company B) by a publicly traded shell company (Pubco).
FactualBackground:
CompanyA owns and operates a business which reported total assets of approximately $32million on its last regularly-prepared balance sheet and total net sales ofapproximately $58 million on its last regularly-prepared annual statement ofincome and expense. Company A is wholly-owned by Mr. A.
CompanyB owns and operates a business which reported total assets of approximately $42million on its last regularly-prepared balance sheet and total net sales ofapproximately $46 million on its last regularly-prepared annual statement ofincome and expense. Company B is wholly-owned by Mr. B.
Pubco is a publicly traded shell company with no annualnet sales and less than $100,000 intotal assets.
MergerSub is a newly-formed subsidiary of Pubco with no assets and no sales.
VC is annewly formed company that will operate as an investment fund. It will have noUPE and no assets other than the $20 million in capital it will raise for usein connection with the transactions described below.
Transactions:
Mr. A and Mr. B willcontribute 100% of the outstanding stock in Company A and Company B,respectively, to Company C, a newly-formed entity. After the contributions, (i)Mr. A will be the UPE of Company C, and (ii) Company C (including theconsideration of Mr. A's personal investment assets, voting securities andother income producing property, together with the total assets of any entitieshe controls), will have total assets and total annual net sales of less than $119.6 million.
Simultaneously, VC will purchase $20 million of stock in Pubcofor what will become an approximate 60% ownership interest in Pubco at the conclusion of alltransactions described herein. Pubco will borrow $130 million for the purpose of making theindirect acquisitions of the stock of Company A and Company B in the mergertransaction described below.
Simultaneously, Merger Sub will merge with and intoCompany C. As a result of the merger, (i) Company C will become a wholly-ownedsubsidiary of Pubco, (ii) Mr. A will receive approximately $86 million in cash and approximately20% of the outstanding stock of Pubco, and (iii) Mr. B will receive approximately $42 millionin cash and approximately 10% of the outstanding stock of Pubco.
Mr. (redacted) and my analysis of the facts is that the"size of person" test is not met in the transactions described above,and that, therefore, no HSR reporting obligations are triggered.
Based on our analysis stated above and our conversationwith you this morning, the parties will proceed on the basis that no HSR Actfilings are required for these transactions. If the foregoing does notaccurately reflect our discussion or if you have any questions or requireadditional information, please contact (redacted).