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Date
Rule
801.13
Staff
Michael Verne
Response/Comments
  Because the stock purchase agreement is not a certainty, you would not aggregate the value of the voting securities with the value of the exclusive portion of the license at the time of entering into the licensing agreement. Since you are not sure whether you will be making the second payment for the license (in the event the SPA is not agreed upon), the acquisition price is undetermined, so you would do a FMV on the exclusive portion of the license. If you later agree on the stock purchase, its value still would not be aggregated with the value of the license, even if that acquisition was not reportable, because you don't aggregate a stock acquisition with an earlier asset acquisition.  K Walsh and S Pope concur.

Question

From: (Redacted)

Sent: Tuesday,February 05, 2013 5:16 PM

To:Verne, B. Michael

Subject:Valuation question

Hi, Mike:

I hope everything is going well with you (I'm guessingso with the Ravens' big win Sunday:-).It turned out to bequite a nail biter in the end.

Per my voice mail, I just want to make sure I'm calculating a purchase price accurately. Seller has been involved in negotiations to sell 100% of the voting securities of its wholly ownedsubsidiary, Company X, to Buyer. The negotiations moved somewhatslowly, and at Buyer's requestand in contemplation of the stock acquisition, the parties recently entered into a partially exclusivelicense agreement prior to the completion of the SPA. As part oftl1at license agreement, Buyer would be obligated to pay an additionalfee as consideration for tl1e continued grant ofrights if the SPA was not signedby a certain date (although the fee would be waived if closing actuallydid occur prior-for to another specified date).

1. Shouldthe exclusive portion of the licensebe valued and aggregated with tl1e value of the stockacquisition in calculating tl1e Size of Transaction (notingthat if the exclusive licensehad not been granted early, any suchrights would have simply been transferredas part of tl1e stock acquisition)?

2. Assuming neither the signingnor the closing dates are met, should that additional fee provided for in the license agreement be taken into account in determining if the Size of Transaction test is met? Wouldit change the analysis if the sig11ing date was not met but tl1e closing date was, but tl1e Seller decidedto negotiate to get the additionalpaymev.t anyway?

Please don't hesitate to let me !mow ifit would be helpful to discuss or if you need any additional information. Thanks so much,

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