Question
From:
(Redacted)
Sent:
Tuesday, June 01, 2010 6:42 PM
To:
Verne, B. Michael
Subject: Informal HSR Advice-Confirmation
Mike,
Thank you for speaking with me today. Iam writing to confirm the informal advice that you provided about the followingproposed transaction.
Description of the Transaction
Buyer, a portfolio company controlled bya private equity fund intends to acquire the following from Target:
1) Contracts,
2) marketing materials, and
3) inventory from Target.
In addition, Buyer will receive:
1) a royalty-bearingexclusive license to use, market, distribute, offer for sale and sell theProducts in the Territory (the U.S.),
2) a royalty-freenonexclusive license to make, have made, import and export the Productsanywhere in the world, solely for sale in the Territory,
3) a royalty-freenonexclusive license under any IP rights owned or controlled by Target or itsaffiliates that are used, but not solely or primarily used, in connection withany of the products to use, make, have made, market, distribute, offer for saleand sell the Products in the Territory, and
4) a nonexclusivelicense of corporate marks.
Buyer will also receive an option topurchase the assets underlying the exclusive license after three years. Buyerintends to exercise the option and purchase the underlying assets.
In consideration for the transaction,Buyer will pay $66 million, plus royalties, which are estimated to total $4 to$5 million over the three year period. The estimated value of the marketingmaterials and inventory is approximately $6 million. Buyer may also assume someliabilities.
Question
While the manufacturing rights aretechnically included in a nonexclusive license, the seller is restricted frommanufacturing the Products for anyone else to sell in the US and from licensing any third-party to make or have made the Products. Do these elements ofexclusivity deem the license "exclusive" for HSR purposes andtherefore an assets that need to be included in the transaction value?
Response
During our call you advised that thenonexclusive license to make, have made, import and export the Productsanywhere in the world, solely for sale in the Territory, is considerednonexclusive and therefore not an asset for HSR purposes, even though theseller is restricted from manufacturing the Products for anyone else to sell inthe US and from licensing any third-party to make or have made the Products.
Thank you for your time and assistancewith this matter. I would be grateful if you could confirm that this email accuratelysummarizes the advice that you provided and the position of your office.